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Vbs mutual bank

The meaning of «vbs mutual bank»

VBS Mutual Bank was a South African mutual bank. In 2018 it was declared insolvent and bankrupt and placed under curatorship, with South African citizens and taxpayers defrauded out of roughly R2 billion (US$130 million).

It was formed as Venda Building Society in 1982, and became a mutual bank in 1992.[2] By 2016 the bank reportedly had around 30,000 depositors with all deposits in the bank totalling R800 million. In 2017 the bank planned to list on the Johannesburg Stock Exchange; however, this never materialized. [3] Most of its branches and clients are located in Limpopo province.

Prior to 2014 the bank was relatively small and primarily involved in retail banking with many of its depositors consisting of burial societies and stokvels. The bank in turn issued mortgages and short-term loans to its clients allowing them to use their property or banking deposits as collateral.[4] The South African Public Investment Corporation inherited its shares in VBS bank when it succeeded the pension fund of the Venda bantustan government[4] thereby giving it a 25% ownership stake in the bank.[5] Largest shareholder in the bank was Dyambeu Investments which owned 26% of the bank, 51% of Dyambeu Investments was owned by the Venda Royal family.[4]

Prior to coming under curatorship in 2018 the bank gained notoriety in 2016 when it gave a R7.8 million loan to then President Jacob Zuma when he was ordered to repay the state for controversial improvements to his personal homestead at Nkandla.[6]

In mid-2018 the South African Reserve Bank (SARB) instructed municipalities to withdraw their deposits in the bank as the Municipal Finance Management Act prevented them from depositing public funds in mutual banks. This, along with mismanagement and corruption within the bank, created a liquidity crisis for the bank.[7] The prudential authority filed for VBS bankruptcy at the North Gauteng High Court on 30 October 2018.[8] On 13 November 2018 the North Gauteng High Court issued a final order to liquidate VBS mutual bank.[9]

Following liquidity problems, VBS Bank was placed under curatorship on 11 March 2018 in terms of the South African Banks Act, Act 94 of 1990, by the South African Reserve Bank.

The collapse of the bank had a large negative impact on the funeral industry in Limpopo Province as the bank was unable to honour insurance and burial society obligations backed by the bank.[10] It also had a devastating impact on stokvel and saving societies held by poor, predominantly black, South Africans in the Limpopo Province.[11]

In October 2018 the national government announced that it would not bail out South African municipalities that had irregularly deposited R1.57 billion with the bank before it collapsed.[12][13] After the bank's collapse it was found that the bank held R372 million in negative equity.[14]

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