The DA welcomes the announcement today by the South African Reserve Bank (SARB) Governor, Lesetja Kganyago, that the VBS Mutual Bank has been placed under curatorship.
This action was triggered by VBS’s inability to find sufficient funding following National Treasury instructing municipalities to stop investing with the bank and withdraw their funds.
Section 7 of Municipal Finance Management Act (MFMA) states that a municipality may not open a bank account with an institution not registered in terms of the Banks Act and mutual banks, such as VBS, are not registered in terms of the Act.
The DA had been concerned for the safety of municipal deposits for some time and therefore submitted a Parliamentary Question to the former Minister of Finance, Malusi Gigaba, probing the extent of exposure of municipal deposits with VBS.
Minister Gigaba responded saying that only 2 municipalities had investments with VBS, as at 30 June 2016. The municipalities being West Rand District Municipality and Capricorn District Municipality.
According to Governor Kganyago, this has subsequently increased to 21 municipalities and deposits in excess of R1.5 billion.
The DA, therefore, supports the actions taken by Treasury and SARB to safeguard the funds of municipalities and other depositors with VBS Mutual Bank.
We will submit further questions to determine the true extent of municipal exposure, why and how this issue arose, and whether municipal officials will be held responsible for their illegal actions.