S. Africa commissions probe into bank failure

CAPE TOWN, April 13 (Xinhua) -- The South African Reserve Bank (SARB) on Friday commissioned a forensic investigation into VBS Mutual Bank in what is believed to be the biggest bank failure in South Africa since 2014.

The primary objective of the investigation is to establish whether any of the business of VBS Mutual Bank was conducted with the intent to defraud depositors or creditors, the central bank said in a statement.

It will also look for questionable, reckless business practices, material non-disclosure and other irregular conduct, it said.

There have been reports of irregularities pertaining to 900 million rand (about 75 million U.S. dollars) in deposits at VBS that could not be traced.

Based on the findings of the forensic investigation, the Prudential Authority (PA), which is responsible for prudential regulation and supervision of commercial banks, will take appropriate follow-up action, the SARB said.

Earlier this week, VBS was put into administration after it was unable to repay money owed to municipalities following a "severe liquidity crisis."

This means that the bank's management team has been relieved of its duties.

In 2017, the bank was fined 500,000 rand (about 40,000 dollars) due to a weakness in its control measures to prevent money laundering and combatting the financing of terrorism.

As one of South Africa's smallest lenders, VBS has operated as a licensed mutual bank, funded by its members, for 25 years. The lender, which isn't listed, gained attention in 2016 when it gave the then president Jacob Zuma a mortgage to settle a Constitutional Court order to repay taxpayers some of the money spent upgrading his private residence.

The bank operates six branches across the country and calls itself a black-owned specialist corporate-finance and retail bank. Its total assets were 2.4 billion rand at the end of December, according to the most recent central bank data.

South Africa's previous bank failure was in 2014 when African Bank Investments' lending unit collapsed after bad debts soared, prompting the central bank to rescue its viable assets. Enditem