{"id":783766,"date":"2024-07-25T08:00:00","date_gmt":"2024-07-25T06:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=783766"},"modified":"2024-08-01T14:12:23","modified_gmt":"2024-08-01T12:12:23","slug":"all-the-banks-that-have-collapsed-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/783766\/all-the-banks-that-have-collapsed-in-south-africa\/","title":{"rendered":"All the banks that have collapsed in South Africa"},"content":{"rendered":"\n

South Africa’s banking sector is often touted as one of the country’s strongest and most successful industries, but it is not without its notable failures.<\/p>\n\n\n\n

South Africa is internationally renowned for its banking system, which is often hailed as one of the best in the world.<\/a><\/p>\n\n\n\n

Despite this, South African banks are not entirely risk-free, and many have been forced to close over the last three decades.<\/p>\n\n\n\n

Since 1990, 14 South African banks have been placed into curatorship, with two being placed into curatorship twice. <\/p>\n\n\n\n

Recent and high-profile collapses were African Bank in 2014 and VBS Mutual Bank in 2018.<\/p>\n\n\n\n

African Bank (now stylised as Africanbank) entered a curatorship in 2014 due to liquidity problems related to unsecured lending.<\/p>\n\n\n\n

Following the group’s collapse, it was effectively split into a “bad bank” and “good bank”. The former took on its worst loans, along with all shareholders and all subordinated creditors. <\/p>\n\n\n\n

The latter was thrown a lifeline, with the South African Reserve Bank (SARB), the Government Employees Pension Fund (GEPF) and a consortium of five other South African banks pumping R10 billion into the group to save it.<\/p>\n\n\n\n

This stabilised the banking system, but shareholders ultimately lost out in a big way.<\/p>\n\n\n\n

This has also been a longer-term problem for the central bank, which accounted for 50% of the bailout. This year, the SARB declared a R982 million impairment loss due to its investment in the African Bank.<\/p>\n\n\n\n

Africanbank is expected to list on the Johannesburg Stock Exchange in 2025, which would require the SARB to sell its shareholding in the bank.<\/p>\n\n\n\n

Africanbank has since gone on to acquire business bank Grindrod and is awaiting regulatory approval to acquire Sasfin’s Capital Equipment Finance and Commercial Property Finance businesses for R3.26 billion.<\/p>\n\n\n\n

VBS, on the other hand, is unlikely to be saved, with the bank in the process of being liquidated. <\/p>\n\n\n\n

Moreover, Tshifiwa Matodzi, the former VBS Mutual Bank chairman, pleaded guilty to 33 counts of corruption as part of a plea and sentencing agreement over R2 billion being stolen from depositors. <\/p>\n\n\n\n

As part of his plea and sentencing agreement, the former chairman is expected to be working with authorities to unravel a massive network of corruption, with senior political figures expected to be involved.<\/p>\n\n\n\n

More recently, the local unit of Pakistan-based Habib Overseas Bank was placed under curatorship after breaking several financial regulations. However, qualifying depositors will receive R100,000 from the SARB. <\/p>\n\n\n\n

Information from the SARB, the Competition Commission, and a report from the University of Pretoria<\/a> show what has happened to all of the banks: <\/p>\n\n\n\n

Bank<\/strong><\/td>Year of Curatorship<\/strong><\/td>Reason<\/strong><\/td>Outcome<\/strong><\/td><\/tr>
Alpha Bank<\/td>1990<\/td>Fraud<\/td>R150 million injected into the bank<\/td><\/tr>
Cape Investment Bank<\/td>1991<\/td>Fraud<\/td>SARB gave R5 million to depositors<\/td><\/tr>
Pretoria Bank<\/td>1991<\/td>Bad management and a dubious merger with Masterbond<\/td>SARB repaid all deposits<\/td><\/tr>
Alpha Bank<\/td>1993<\/td>The R150 million injection could not save the bank<\/td>Liquidated<\/td><\/tr>
Sechold Bank<\/td>1994<\/td>Liquidity problems due to a loss of depositor and investor confidence<\/td>Investec acquired managerial control <\/td><\/tr>
Prima Bank<\/td>1994<\/td>Liquidity problems due to non-performing loans<\/td>Recapitalisation, where the government guaranteed non-performing loans<\/td><\/tr>
African Bank<\/td>1995<\/td>Bad Management and Liquidity Problems<\/td>Recapitalisation where the government guaranteed non-performing loans <\/td><\/tr>
Community Mutual Bank<\/td>1996<\/td>Liquidity problems due to a very high expense-to-income ratio<\/td>Acquired by Unibank for R50 million<\/td><\/tr>
Islamic Bank<\/td>1997<\/td>Bad management and improper accounting, particularly around unsecured lending. Liquidated<\/td>Liquidated + SARB covered depositors up to R50,000<\/td><\/tr>
FBC Fidelity Bank<\/td>1999<\/td>Bad management and liquidity problems<\/td>Partly transferred to FBC Fidelity Bank <\/td><\/tr>
Regal Treasury Bank<\/td>2002<\/td>Auditors rescinded their approval of the bank\u2019s controlling company\u2019s financial statements, which caused a run-on.<\/td>Investec Acquired Debtors Book + Liquidated<\/td><\/tr>
New Republic Bank<\/td>2002<\/td>Bad management and liquidity problems<\/td>Merged with FBC
Fidelity Bank Limited<\/td><\/tr>
Saambou Bank<\/td>2002<\/td>Bad management and liquidity problems<\/td>Liquidated + R7 billion dividend to shareholders<\/td><\/tr>
African Bank<\/td>2014<\/td>Bad management and liquidity problems, especially around unsecured lending<\/td>SARB took 50% ownership + set for JSE listing<\/td><\/tr>
VBS<\/td>2018<\/td>Bad management and liquidity problems <\/td>Liquidated + under investigation<\/td><\/tr>
Ubank<\/td>2022<\/td>Failure to meet the minimum capital adequacy ratio <\/td>Acquired by Africanbank<\/td><\/tr>
Habib Overseas Bank <\/td>2023<\/td>Non-compliance with regulations, including exchange control regulations.<\/td>Liquidated (ongoing) + SARB pays depositors up to R100,000<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n

Protection <\/strong><\/p>\n\n\n\n

Notably, South African customers are now offered some form of protection from failing banks after the SARB introduced the Corporation for Deposit Insurance (CODI), which will protect depositors in case of a bank failure – bringing South Africa in line with other G20 countries. <\/p>\n\n\n\n

CODI is South Africa\u2019s Deposit Insurance Scheme (DIS) and was created to protect qualifying bank depositors in the unlikely event of their bank failing.<\/p>\n\n\n\n

The cover extends to qualifying depositors of all banks, including commercial, cooperative, mutual and foreign banks.<\/p>\n\n\n\n

Qualifying depositors include non-financial businesses, charitable or nonprofit organisations, religious entities, trade unions, consumer associations, and stokvels. <\/p>\n\n\n\n

Depositors are guaranteed access to up to R100,000 of their deposits in case of a bank failure. <\/p>\n\n\n\n

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Major South African bank up for sale<\/a><\/blockquote>