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National Treasury and the South African Reserve Bank (SARB) only knew last year that the municipal deposits into VBS Mutual Bank were illegal, former finance minister Nhlanhla Nene has said.
In a written reply to questions from Members of Parliament, Nene said by the time it became apparent that the state of the bank would present a financial quandary for local government, it was too late to prevent the fallout, and regulators had to opt for intervention instead.
Democratic Alliance MP Kevin Mileham asked Nene whether the South African Reserve Bank or any of National Treasury’s departments conducted any form of compliance monitoring on the VBS Mutual Bank regarding its acceptance of illegal deposits from municipalities.
In his reply dated 31 August 2018, Nene said: "Since the SA Reserve Bank does not specifically monitor with compliance of the Municipal Finance Management Act, it only became aware that such deposits were not legal in 2017."
He added: "The report by Adv Terry Motau outlines new facts that the Reserve Bank is still considering, especially given that many there was massive fraud committed, including in the monthly and audited financial statements."
Nene said he requested the SARB to provide the relevant information to National Treasury to respond to this question.
"The new Financial Sector Conduct Authority, together with the National Credit Regulator, will both be also supervising banks for market conduct henceforth.
"It should be noted that the onus for compliance with all laws lies with the management of any bank, under the oversight of its Board and shareholders," said Nene.
Nene added that VBS Mutual Bank’s financial year ends in March next year and the Reserve Bank report by independent investigator Adv Motau, titled The Great Bank Heist, would provide some guidance on the way forward.
Nene noted that VBS was allowed to accept deposits in terms of section 54(1)(a) of the Mutual Banks Act.
"There is no specific provision in the Mutual Banks Act which prohibits mutual banks from accepting deposits from municipalities, but section 7((3) of the Municipal Finance Management Act 56 of 2003 prohibits a municipality from opening a bank account with an institution that is not a registered bank in terms of the Banks Act," Nene said.
In a previous reply Nene told MPs that Treasury would facilitate support for ordinary retail customers who lost money in the VBS fallout, but said municipalities could not get such assistance for their illegal deposits.
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