The Standing Committee on Finance is determined to find solutions to the challenges facing Ithala Bank to prevent the bank’s demise. The committee is conducting a two-day oversight visit to the bank following the Financial Sector Conduct Authority’s suspension of the bank’s financial services provider licence, after Ithala Bank failed to meet the solvency requirements set out in the Financial Advisory and Intermediary Services Act 37 of 2002.
The committee highlighted that because of the suspension, Ithala Bank is now prevented from engaging in new business activities but can continue servicing existing clients. While this will ensure that the bank continues to do its work, its inability to find new clients will have an adverse impact on its sustainability and on its ability to generate income and pay for its liabilities.
“Our visit here is to ensure that a bank with the developmental mandate, such as Ithala, does not die on our watch. The great history of the bank, which was established in 1958, and the critical services it provides to rural communities is important and cannot be erased,” said Dr Joe Maswanganyi, the Chairperson of the committee.
The committee heard that the bank has an extensive rural footprint and serves communities that, in some cases, must travel more than 100 kilometres to the nearest commercial bank. Currently, Ithala Bank serves over 61 000 South African Social Security Agency (SASSA) grant beneficiaries and the suspension will prevent new beneficiaries from using the bank to access their grants.
The suspension, which has been effective since 26 July 2024, will remain in place until Ithala satisfies the conditions required to lift the sanction.
The committee also noted with concern the complete breakdown in trust between the bank and the regulatory bodies, including the National Treasury’s Prudential Authority and the Financial Sector Conduct Authority. The committee highlighted that this breakdown impacts directly on the bank’s ability to remedy identified shortcomings.
“It is important that the relationship of trust and collegiality is achieved if the bank is to recover from the current position it is in. It is necessary to ensure that we remove the emotions from the matter and focus on scientifically addressing current challenges,” Dr Maswanganyi emphasised.
Meanwhile, the MEC for Economic Affairs, Tourism and Environmental Affairs, Reverend Musa Zondi, assured the committee that the KwaZulu-Natal provincial executive is committed to assisting the bank to remedy its shortcomings.
The MEC for the KZN provincial treasury, Mr Francois Rodgers, also emphasised that if the bank is liquidated, the provincial treasury will have to inject large sums of money into the bank to pay off staff and liabilities. “The province does not have about R5 billion that is needed if the bank was to collapse. I have informed the repayment administrator that it will cost more to liquidate the bank as opposed to finding solutions,” Mr Rodgers emphasised.
Meanwhile, after the Minister of Finance submitted an apology a day before the commencement of the oversight meeting to excuse himself from the meeting, the committee resolved that it is imperative that regulatory bodies attend its oversight meetings.
“It is unacceptable that the regulatory bodies raise objections to the oversight being held in Durban. We have demanded that the regulatory bodies attend, in person, the Wednesday meeting, to enable closer scrutiny of the challenges they have identified. As a result, the committee will meet with every stakeholder to seek solutions to the bank’s challenges. We must ensure that our oversight is strategic and not a box-ticking exercise. In line with this, the committee has asked Ithala Bank to provide a detailed plan on identified shortcomings and possible remedies with timelines,” Dr Maswanganyi concluded.
Malatswa Molepo
3 September 2024
Arrange a tour