Explainer: What happens now that the VBS Mutual Bank has been liquidated?

Explainer: What happens now that the VBS Mutual Bank has been liquidated?

- VBS Mutual Bank has officially been moved from curatorship to liquidation

- The liquidation will see the appointment of a liquidator to manage the bank and pay out what it can to the victims involved

- Cyril Ramaphosa, as well as Tito Mboweni, hopes to keep the original model of the bank and will aid the process

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In March this year, a small mutual bank, called VBS Mutual, was placed under curatorship under the disguise of a serious liquidity crisis. The curator initially found significant financial losses, which in turn prompted a forensic investigation.

The forensic investigation was complete by early October and was handed over to the Prudential Authority, a regulator for the banking industry. The report revealed the liquidity crisis as what it was: widespread looting of the bank and the subsequent cover-ups.

Due to these findings, the report was given over to South African law enforcement authorities for further scrutiny and for the prosecution of the people involved.

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Advocate Terry Motau who had headed up the investigation said “I have, for the past five months, investigated the sorry affairs of the VBS Mutual Bank. My report will reveal that the perpetrators of the heist at VBS made away with almost R2 billion.”

The Prudential Authority asked a South African court to end the curatorship and for permission to place the bank under liquidation.

The regulator had explained that liquidation was necessary because VBS was not capable of recovery from its current situation.

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So what happens to VBS now? The liquidation will see the “winding down” of the bank under the terms of the Companies Act. The bank will be managed to ensure that the depositor's value is maximised, to collect on loans and to recover as much of the money lost as possible.

Under curatorship, the curator would have had more say over who gets paid and how much. Under liquidation, this discretion is gone.

The Treasury has issued a guarantee that will see 97% of retail depositors will be covered under the liquidation.

The final order to liquidate VBS Mutual Bank came from the North Gauteng High Court. The affidavit the Authority went unopposed.

Now that the liquidation has been approved, it is expected that a liquidator will be appointed to ensure that the civil and criminal proceedings can be pursued in order to hold those responsible for the theft of almost R2 Billion accountable.

It is yet unclear whether the model of the bank will be kept as President Cyril Ramaphosa as well as Finance Minister Tito Mboweni have been hoping.

"We should revive VBS, let it rise from the ashes and reestablish a VBS which is clean, which will operate along the principles that the original VBS was established for," Ramaphosa said.

"It is essential for all those responsible for facilitating this fraud, this corruption, and those who benefited must be held accountable," the president said.

"As we deal with VBS matter, it is important we do not throw the baby out with the bathwater … the model of VBS before the great heist was correct... as part of the model to transform the banking sector," Finance Minister, Tito Mboweni said.

"We will work with the regulator to ensure that that the model doesn’t disappear," Mboweni added.

The “ Great Heist Report” which was commissioned by the South African Revenue Service to look into the looting at the bank revealed how almost R2 Billion was stolen, leading to this inevitable liquidation.

The victims of the scandal included countless depositors and bondage loaners. This included over 15 municipalities engaged in business illegally with the bank. High-ranking politicians, business people as well as various political parties were implicated in the controversial report.

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Source: Briefly.co.za

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