Durban — Parliament’s Finance Committee has slammed Ithala Bank management for failing to comply with SA Reserve Bank regulations.
Speaking to the Daily News on Wednesday after meeting with the Reserve Bank and Financial Sector Conduct Authority (FSCA), finance portfolio committee chairperson Joe Maswanganyi dismissed the insinuation that the FSCA’s refusal to extend Ithala Bank’s exemption licence was political.
Maswanganyi said that after listening to a presentation by the SA Reserve Bank and FSCA on Wednesday, it became clear that it was Ithala’s non-compliance with the stipulated regulations that compelled the FSCA to not renew the exemption licence.
The FSCA was simply carrying out the SA Reserve Bank’s instruction which had picked up that the KwaZulu-Natal-owned entity was not complying, he said.
The financial regulator suspended Ithala’s exemption licence, citing non-adherence to rules.
“In our meeting on Tuesday with Ithala management it blamed the FSCA. Then we said let's ask them to come and explain their side.
“They came and explained to us that it was Ithala that was failing to comply with the requirements which led to the suspension of the exemption licence,” said Maswanganyi.
The ANC MP said the Finance Committee has been to the province to deal with the issue of non-compliance by Ithala, therefore, it was incorrect to insinuate the licence was suspended for political reasons.
Maswanganyi also dismissed Ithala’s view that its licence’s suspension came as a result of the Financial Matters Amendment Act which excluded provinces from establishing commercial banks, saying there was no clause that forbade provinces from doing so.
He urged the bank management to clean its house before complaining.
However, he said his committee valued the work of Ithala as it served poor communities from rural areas as the mainstream banks were not there.
“We support Ithala Bank to be a fully-fledged bank so it must sort out its compliance matters. The visit by the committee enabled us to share our challenges with the government.
“We were happy because this put Ithala on the national agenda.
“There has to be a policy intervention to ensure the viability of the bank,” said Maswanganyi.
Ithala CEO Dr Thulani Vilakazi said the bank’s non-compliance was caused by losing the exemption.
Vilakazi said another major issue that the FSCA regarded as non-compliance was the requirement that banks’ assets must be greater than their liabilities, which no bank was currently meeting.
He said this meant the bank could not loan more than the customer deposits it held.
Vilakazi said because of the difficulty of this requirement all banks were exempted from it and he did not understand why it was only Ithala that should comply with it.
Vilakazi further reassured the bank’s customers that their money was safe and would not be affected by the suspension of its operating licence.
Vilakazi previously said that the only service that would be affected by the suspension of Ithala Bank’s licence was the insurance policies, adding that the bank had since written a letter to the FSCA requesting it to move the service to its mother body, Ithala Development and Finance Corporation because the financial service provider licence for that was not affected.
At a media briefing two weeks ago, the KwaZulu-Natal Economic Development, Tourism and Environmental Affairs MEC, Reverend Musa Zondi, blamed politics for the bank’s problem.
He warned that if the decision led to the closure of the bank, the poor would suffer the most as the decision would push poor people back to commercial banks which did not easily fund them because they categorised them as high risk.
Zondi said it was only Ithala that gave housing loans to rural people where there were no title deeds which commercial banks demanded.
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