Cape Town – Minister of Finance Enoch Godongwana has placed Habib Overseas Bank under curatorship with immediate effect “to deal with its governance, compliance and operational failures”.
The minister took the decision based on a recommendation from the Prudential Authority (PA) at the South African Reserve Bank (SARB), the South African Reserve Bank (SARB) said on Monday.
Habib Overseas Bank is the local unit of a Pakistani-based lender that received an SA banking licence in 1990. It provides, among other things, term loans, overdrafts, mortgages, bills of exchange and credit facilities to customers in South Africa.
“Over the past four years, the PA had intensified its supervision of Habib Overseas Bank because of identified weaknesses in the bank’s governance process, its internal control environment as well as the various investigations and reviews which have repeatedly confirmed the bank’s non-compliance with a number of financial sector regulations. This non-compliance also relates to significant findings relating to breaches of exchange control regulations.
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“Having duly considered the continuing failure of the bank’s Board of Directors (Board) 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 as required by the Banks Act 94 of 1990 and the Regulations relating to Banks, the minister of finance, on a recommendation from the PA, decided to place Habib Overseas Bank under curatorship with immediate effect. This is being done to proactively protect the bank’s depositors,” SARB said.
Upon the appointment of a curator, the board and management of the bank have been relieved of all their powers, which are now vested with the curator, subject to the supervision of the PA.
The curatorship provides the legal framework within which the necessary initiatives can take place to enable an orderly resolution.
The Minister of Finance has appointed PwC as curator, with Craig du Plessis responsible for Habib Overseas Bank with immediate effect.
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Habib Overseas Bank will continue to operate during the period of curatorship, subject to the assessment of the 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. The curator is also required to recover and take possession of all the assets of Habib Overseas Bank, SARB said.
It added: “Habib Overseas Bank remains liquid, with a liquidity coverage ratio above the regulatory requirement, and there are no immediate concerns for depositors, which means their funds remain safe at the bank. The curator will keep customers informed of any significant new developments 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.”
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Compiled by Betha Madhomu