The National Treasury on Thursday noted what it deemed the “reckless manner” in which Viceroy, a US-based trader/research firm, released its report on Capitec bank.
Viceroy’s report, titled Capitec: A Wolf in Sheep’s Clothing, made damning claims against the micro-lender, calling the bank a loan shark headed for insolvency.
The research report said that its analysis pointed to predatory lending practices from Capitec, where clients would be pushed to take out new loans to pay off the old ones, while being charged initiation fees and incurring other costs.
Capitec denied the claims calling the report “flawed and inaccurate” and instructed its lawyers to lay a formal complaint with the Financial Services Board.
“Viceroy is not regulated in South Africa, and by its own admission, has been trading [short selling] in Capitec shares ahead of the release of its report, and stood to benefit substantially from forcing the Capitec share price to fall by publishing its speculative report about the bank,” Treasury said in a statement on Thursday.
It noted that until two weeks ago, Viceroy operated anonymously and opaquely, “and the reckless way in which it has released its report is clear proof that it is not acting in the public interest nor in the interest of financial stability in South Africa.
“Whilst the Treasury expects prudential and market conduct regulators in SA to consider all relevant reports in the public domain, and to act where any risks or transgressions in the law are identified, Treasury is of the view that the Viceroy report provides no basis to put any bank under curatorship.”
The National Treasury said it has been in constant contact with the Registrar of Banks since the report was released, “and is satisfied with the assurance from the South African Reserve Bank that Capitec is well capitalised, liquid and solvent, and meets all prudential requirements. This means that the funds of depositors are safe”.
National Treasury said it has requested that the Financial Services Board, as the market regulator, working with the JSE, urgently considers whether it should initiate a market abuse investigation into the conduct of Viceroy, and to ensure that it is regulated appropriately.
“The FSB is requested to also alert relevant overseas regulators, like the Securities and Exchanges Commission in the USA and the Financial Conduct Authority in the UK, to consider whether Viceroy is regulated appropriately, and to consider whether it has transgressed any of their market conduct and market abuse laws that aim to protect investors.”
In a note on Wednesday, S&P Global Ratings said that its ratings on Capitec Bank Ltd (BB/Stable/B) are not affected by the report or by the market’s reaction to the report.
Read: Capitec gets S&P backing