South African small lender VBS Mutual Bank has been placed under curatorship because of liquidity issues, Reserve Bank Governor Lesetja Kganyago told a televised news conference on Sunday. Curatorship means the central bank can appoint an administrator or curator to run the bank, which was thrust into the spotlight in 2016 when it provided a 7.8 million rand ($660,000) loan to former president Jacob Zuma to reimburse the state for upgrades to his personal home.
According to its 2016 annual report, its total assets were around 1 billion rand ($85 million), and any failure would not pose a systemic risk to the wider economy.
“VBS experienced increasing liquidity challenges over the last 18 months,” Kganyago said.
He said the problems stemmed from it taking sizeable deposits from municipalities that were short term and then making long-term loans from this risky base.
Mutual banks in South Africa do not offer the full range of services that commercial banks do and the governor said municipalities were not allowed to make deposits with such entities in the first place.
He said the bank remained open for business.
($1 = 11.8078 rand)
Reporting by Ed Stoddard; Editing by David Evans (Reuters)