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Cape Town - Some 16 months after the collapse of African Bank, the verdict is still out on whether fraud, misconduct and/or lack of disclosure led to the lender’s demise.
The bank relaunched on Monday morning, keeping the name and corporate identity intact, yet there has been no word on the outcome of an investigation launched by the South African Reserve Bank (Sarb) into possible inappropriate activities by African Bank’s executive team.
A source - who spoke to Fin24 on condition of anonymity and who has insight into the report - said the reasons for the bank’s collapse are “a little more complicated” than just a bad debtors' book and loosening its lending criteria. “There is indeed evidence of misconduct,” the source said.
In September 2014, the Sarb appointed lawyer John Myburgh who was tasked with checking for evidence of fraud or lack of disclosure at African Bank.
'Swept under the carpet'
The report was concluded a year ago, but to date the Sarb governor has kept mum on the details. “For more than a year, details of the African Bank scandal have been swept under the carpet,” DA shadow minister of finance David Maynier said in a statement on Monday.
“The final report of the formal independent investigation has never been made public. I have, therefore, written to the governor of the South African Reserve Bank, Lesetja Kganyago, requesting him to provide an indication of when the whereabouts of this report will be made public.”
In the past, said asset manager Futuregrowth, African Bank had been growing too fast through loosening its credit criteria. This included extending repayment terms for loans and increasing the allowed amount to individual borrowers who were increasingly victims of the debt trap, in an environment where many of them were unemployed.
But there is reason for a more optimistic view with the newly-launched bank, said Olga Constantatos, investment analyst at Futuregrowth. “The new bank has a new management team in the main and a lot of capital has been injected. We would also like to believe the book they’re bringing over is good, and that the toxic assets have been left behind. These are good building blocks.”
Constantatos added that the curatorship under which the bank was placed in August 2014 was designed as a temporary measure, so that a so-called Good Bank could be launched with some chance of success.
“Hopefully they’ve learnt from their mistakes and strengthened their credit criteria and grant credit on a more sustainable basis. But the proof is in the pudding as to how it progresses from here.”
