TREASURY'S RESPONSE TO THE VBS MUTUAL BANK MATTER
The National Treasury can confirm that the Minister of Finance has approved the recommendation of the Registrar of Banks to place VBS Mutual Bank under curatorshlp in order to nurse the bank back to health.
The Registrar of Banks fulfils a critical role in the regulatory framework to protect depositors, customers, and the shareholders of a mutual bank. The aim of curatorship is ultimately o turn the mutual bank around. This is in contrast with liquidation, where the mutual bank is closed down. The curator is given the legal means to create the necessary mechanisms to implement a resolution plan which will ensure the long-run sustainability of VBS. The recent example of African Bank whch emerged as a stronger bank after curatorship should be noted.
In mid-2017, following an application from the Fnancial Services Board, the High Court placed two related parties, Bophelo Beneficiary Fund and Bophelo Benefit Services under curatorship. It is critical to protect customers, particularly widows and orphans who may have their savings affected by this prob em. The Financial Services Board has indicated that there are other related parties that may be impacted by the curatorship.
The rationale for restricting municipalities and their entities from placing funds into mutual banks is consistent with the objective of ensuring that funds meant for service delivery are managed as responsibly as possible. The list of permitted investments therefore does not include any equity or equity-like instruments i.e. shares in an institution.
Mutual Banks are very different to commercial banks. Some of the notable differences.