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Finance Minister Enoch Godongwana.
Gallo Images/Brenton Geach
- The minister of finance has placed Habib Overseas Bank under curatorship.
- A company linked to Gupta associate Salim Essa tried to buy the bank in the past, without success.
- The SA Reserve Bank found that the bank was flouting financial sector regulations, including SA’s strict exchange control rules.
- For more financial news, go to the News24 Business front page.
Minister of Finance Enoch Godongwana has placed Habib Overseas Bank under curatorship with immediate effect to deal with “governance, compliance and operational failures” and protect the bank’s depositors.
The minister took the decision based on a recommendation by the SA Reserve Bank’s (SARB) Prudential Authority (PA).
In a statement on Monday morning, the SARB said the PA had identified weaknesses in the bank’s governance process and its internal control environment over the past four years.
It added that “various investigations and reviews” found that Habib Overseas Bank was flouting financial sector regulations, including SA’s strict exchange control rules.
“The continuing failure of the bank’s board of directors and management to deal effectively with the weaknesses in controls and its poor regulatory compliance, as well as the growing risks over its ability to meet future obligations,” it said.
Habib Overseas Bank had, by Monday afternoon, updated its website to say that it had been placed under curatorship. “Please note online bank services have been temporarily closed for 72 hours as of Monday 27 March 2023,” the notice read.
Last year amaBhungane reported that the bank appeared to have been used by a money laundering syndicate to spirit funds overseas. Habib told the site it had been the victim of an “unscrupulous client acting in concert and collusion with some staff members”.
The investigative journalism outfit also reported that low-cost cigarette manufacturer Gold Leaf moved funds to Habib once other banks closed its accounts. Gold Leaf’s assets were provisionally frozen by the SA Revenue Service last year. A spokesperson for the tobacco group has denied any wrongdoing.
Failed Gupta buyout
Habib Overseas Bank made the news six years ago when Vardospan, a company linked to Gupta associate Salim Essa, tried and failed to buy a controlling stake in the bank for about R450 million.
Vardospan went to court in early 2017 in an attempt to force the SARB, and the registrar of banks to rule on whether it could buy the stake before the purchase offer from Habib’s parent company ran out.
While the Competition Commission had given the merger between Vardospan and Habib the green light, the deal effectively stalled after the court threw out Vardospan’s urgent bid.
The SARB described Habib Overseas Bank as a “small financial institution” that was first licensed as a bank in SA in 1990. It has five branches in SA and about 90 employees.
It will continue to operate during the period of curatorship. PwC has been appointed as the bank’s curator.
“The curator will assume the powers of the board and management and will make decisions regarding the bank’s continued granting of loans and sound banking activities generally,” said the central bank. “The curator is also required to recover and take possession of all the assets of Habib Overseas Bank.”
Closed
The bank’s curator, Craig Du Plessis of PwC, announced on Monday morning that the bank would be closed for (at least) 72 hours.
“The bank will not be open for any banking activity, either online or in the branches during this period. This action is necessary to protect all stakeholders of the bank,” he said.
“Customers who have credit facilities from the Bank are legally obliged to continue to pay their monthly instalments in accordance with the terms of their agreements with the Bank,” he added.
SARB added that the bank remains liquid, and there were no “immediate concerns for depositors, which means their funds remain safe at the bank”.
“South Africa’s banking sector remains healthy and robust, and it is unlikely that other South African banks will be negatively affected by Habib Overseas Bank’s current situation,” it said. “The governance challenges and reasons for this curatorship are not related to the recent difficulties with banks in the United States and Switzerland.”
Habib Overseas Bank is unrelated to Habib Bank AG Zurich, which also operates in South Africa.
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