Finance Minister moves to place Habib Overseas Bank under curatorship – prompted by greylisting?

27 Mar 2023

Habib Overseas Bank, one of the smaller South African banks that opened its doors in 1990, was placed under curatorship on Sunday night by the Minister of Finance. This followed a recommendation from the Prudential Authority based on governance, compliance and operational failures at the bank.

In a media statement, the South African Reserve Bank hastened to add that the bank – which provides term loans, overdrafts, mortgages, bills of exchange and credit facilities – remains liquid, with a liquidity coverage ratio above the regulatory requirement, and that there are no immediate concerns for depositors, which means their funds remain safe at the bank.

In 2016, the Guptas allegedly attempted to buy Habib Overseas Bank after they were shut out by other South African banks.

“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,” the SA Reserve Bank (Sarb) 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 not related to, and should not be confused with, Habib Bank AG Zurich (HBZ), which also operates in South Africa but is a different bank and not under curatorship.”

Over the past four years, the Prudential Authority had intensified its supervision of Habib Overseas Bank on the back of identified weaknesses in the bank’s governance process, its internal control environment as well as various investigations and reviews which repeatedly confirmed the bank’s non-compliance with several financial sector regulations. This non-compliance also relates to significant findings relating to breaches of exchange control regulations and could be viewed as the Sarb flexing its powers following South Africa’s recent greylisting.

A statement from the Sarb notes that the curatorship with immediate effect is a proactive step to protect the bank’s depositors, in light of the continuing failure of the bank’s 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.

Curatorship

PwC, and specifically Craig du Plessis, have been appointed as curators, which means the board and management of Habib Overseas Bank have been relieved of all their powers. This also applies to any other person previously vested with the management of the affairs of the bank.

Curatorship is a legal process, which enables the Sarb to relieve the board and the executive management of a bank and appoint a curator. The curator must manage the bank with the interests of its creditors (including depositors), the banking sector and employee rights in mind. Habib Overseas has fewer than 90 employees and five branches at the Oriental Plaza, Laudium, Lenasia, Cape Town and Durban.

The motivation for curatorship is the protection of the banking sector and retail depositors, and the process allows the curator to stabilise the bank.

Habib Overseas Bank will continue to operate during the period of curatorship, and Du Plessis will assume the continued granting of loans and other banking activities. In his role as curator, Du Plessis is also required to recover and take possession of all the assets of Habib Overseas Bank.

PwC has advised that to assess the position of Habib Overseas Bank, it has closed the bank for 72 hours or possibly longer, and the bank will not be open for any banking activity, either online or in the branches during this period.

Customers who have credit facilities from Habib Overseas Bank are legally obliged to continue to pay their monthly instalments in accordance with their bank agreements. BM/DM

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Curatorship