The Finance Committee is resolute in its efforts to discover answers to the obstacles confronting Ithala Bank in order to avert the bank’s collapse. The committee is currently engaged in a two-day inspection trip to the bank in response to the Financial Sector Conduct Authority’s halt of the bank’s financial services provider license, due to Ithala Bank’s inability to meet the solvency standards outlined in the Financial Advisory and Intermediary Services Act 37 of 2002.
The committee emphasized that due to the suspension, Ithala Bank is currently unable to participate in any new business endeavors but is still allowed to cater to its current customers. Whilst this will guarantee that the bank carries on with its operations, its failure to secure new customers will negatively affect its longevity and its capacity to produce revenue and cover its debts.
Our presence at this location is to guarantee that a financial institution like Ithala, which has a focus on development, remains operational under our surveillance. Dr Joe Maswanganyi, stated that the significant history of the bank, which was founded in 1958, and the essential services it offers to rural communities are crucial and cannot be eliminated.
The committee was informed that the bank has a wide rural presence and caters to areas where, in certain instances, individuals have to journey over 100 kilometers to reach the closest retail bank. At present, Ithala Bank caters to more than 61,000 recipients of South African Social Security Agency (SASSA) grants, and the halt will stop fresh beneficiaries from utilizing the bank for grant withdrawals.
The halt, put in place since 26 July 2024, will continue until Ithala fulfills the necessary requirements to remove the penalty.
The committee expressed concern about the full collapse of confidence between the bank and regulatory authorities, such as the National Treasury’s Prudential Authority and the Financial Sector Conduct Authority. The committee emphasized that this malfunction has a direct impact on the bank’s capacity to address acknowledged deficiencies.
Establishing trust and collaboration is crucial for the bank to improve its current situation. It is crucial to guarantee that we eliminate the sentiments from the issue and concentrate on scientifically tackling present difficulties,” Dr Maswanganyi underscored.
In the meantime, Reverend Musa Zondi, the MEC for Economic Affairs, Tourism, and Environmental Affairs, affirmed to the committee that the KwaZulu-Natal provincial government is dedicated to helping the bank rectify its deficiencies.
The MEC of the KZN provincial treasury, Mr Francois Rodgers, also stressed that in the event of the bank being dissolved, the provincial treasury would need to infuse substantial amounts of funds into the bank in order to settle debts and obligations. The province lacks approximately R5 billion required in the event of a bank collapse. I have communicated to the repayment administrator that the cost of closing the bank is higher than finding alternatives,” Mr. Rodgers stressed.
In the meantime, following the Finance Minister’s pre-meeting apology, the committee decided it is crucial for the regulatory bodies to be present at oversight meetings.
“It is not acceptable that the regulatory authorities are objecting to the supervision taking place in Durban.” We have requested the presence of the regulatory agencies at the Wednesday meeting so that we can carefully examine the challenges they have outlined in more detail. Consequently, the committee will convene with each party involved to find answers to the bank’s difficulties. We need to make sure that our supervision is planned and not just a checklist task. Following this, the panel has requested Ithala Bank to present a comprehensive strategy addressing issues that have been identified, along with potential solutions and deadlines,” Dr Maswanganyi finalized.
Publishing Editor: Msizi Mavundla
