Category: Banks
Banks facilitated South Africa corruption under Zuma
Several international banks enabled corruption in South Africa under former President Jacob Zuma, British lawmaker Peter Hain has said.
At an inquiry hearing, he said HSBC, Standard Chartered and India’s Bank of Baroda were “directly culpable”.
The inquiry is investigating claims of graft against Mr Zuma and the Gupta family. They deny any wrongdoing.
HSBC said it supported the inquiry while Standard Chartered said there was no evidence linking it to the Guptas.
No-one from the Bank of Baroda was immediately available for comment.
https://www.bbc.com/news/world-africa-50463681
Banking on Reform – An African Case Study
The ongoing curatorship of African Bank has perhaps arisen at a fitting time, when what was historically feverishly slow and sparse insolvency reform across the African continent may just be showing signs of
awakening (the recent enactment of the new Insolvency Act 2015 in Kenya and introduction of Chapter 6 Business Rescue proceedings into the new Companies Act in South Africa being but two examples of this).
The often stark contrast between local practices (which can vary greatly across the African continent’s different jurisdictions) and that which is more closely aligned toward international regimes (UNCITRAL model law and
cross border insolvency regimes being of relevance here) remains a key challenge.
As investors seek to capitalise on growth opportunities across Africa (but at the same time view the risk of insolvency and a lack of clarity over insolvency outcomes and or workout mechanisms available to them as key
impediments), never so more than today has insolvency reform and transparency been more pertinent, for both local and foreign stakeholders alike.
https://www.insol.org/emailer/Nov_2015_downloads/Document1.pdf
Constitutional case launched against SA banks
Over 225 applicants, primarily from Gauteng’s poorer townships, have instituted a R60 billion claim for damages against some of South Africa’s biggest banks.
GroundUp reports that the case revolves around a number of unlawful repossessions by the banks over the past 23 years, with the R60 billion figure based on the average estimated loss of home equity value, multiplied by the roughly 100,000 homes repossessed since 1994.
Nedbank, Absa, FirstRand Bank and Standard Bank are cited as respondents in the case, as well as the National Credit Regulator, the Minister for Justice and Constitutional Development, the SA Human Rights Commission and the High Court Rules Board.
https://businesstech.co.za/news/banking/192768/massive-r60-billion-constitutional-case-launched-against-sa-banks/
Calls grow for class action law suits against banks over securitisation
Disgruntled bank customers are calling for a class action suit against the banks after new evidence suggests banks are concealing their securitisation activities from customers, the courts and investors, in what could turn out to be the largest banking fraud in South African history.
Scores of South Africans have added their voices to the growing clamour for a class action suit against the banks in response to what may turn out to be the biggest fraud in South African history. This follows publication of research coordinated by Advocate Douglas Shaw suggesting that banks are securitising home loans but hiding this fact from the courts when seeking judgment against customers allegedly in default.
Securitisation is the banks’ practice of bundling loans together and on-selling them investors who buy and sell these assets on the JSE and other stock markets. Once a loan is securitised, the bank loses legal title to the loan.
http://www.acts.co.za/news/blog/2015/03/calls-grow-for-class-action-suits-against-banks-over-securitisation
Reserve Bank should act on Absa’s interest mistakes
THE South African Reserve Bank seems to have little appetite to deal with the miscalculation of interest rates by Absa. The bank has been paying back its customers millions of rand because it overcharged them on their credit cards. I am told more than 50,000 clients were affected, with one client due a R90,000 refund.
One would have expected the Reserve Bank to move swiftly and assess how deep this goes. But the central bank’s response is that “in terms of section 33 of the South African Reserve Bank Act, (it) does not comment on individual entities. Complaints on interest rate charges are referred to the banking ombudsman as the (Reserve Bank), in terms of the Banks Act, does not have the legal powers to intervene between a bank and its client.”
I think the Reserve Bank is reading the act too narrowly. It does not know how widespread this problem is and immediately concludes that it should not intervene. What if it is widespread and affects other banks?
A few years ago, Absa miscalculated interest on a client’s car loan. A senior Reserve Bank official said — and I have it on record — that it was an “isolated incident”. I guess he was wrong, because it has happened again with another Absa lending product.
A miscalculation of interest can pose a risk to SA’s banking system. Imagine if a bank had overcharged clients interest to the tune of R2bn and these clients were suing to get their money back. This would be a problem for the bank as R2bn is a lot of cash.
Dealing with interest miscalculation should not be restricted to the National Credit Regulator and the banking ombudsman. The Reserve Bank is tasked with promoting the soundness of SA’s banking system, and should take on this battle.
Speaking of battles, all because of brinkmanship, about R500m owed to five large South African banks is now at risk and may not be fully recovered should there be a failure to sell African Bank Investments Limited (Abil) subsidiary Standard & General Insurance (Stangen). If other creditors are included, the sum owed to creditors is close to R1bn. Should Abil’s business rescue fail and a liquidation is granted, the biggest losers will be the creditors, including the banks.
The parties involved include Abil’s black economic empowerment (BEE) shareholders, business rescue practitioners and African Bank curator Tom Winterboer. Last week Winterboer, under pressure to create a “good bank” from Abil by February, walked away from acquiring Stangen.
Winterboer had offered R1.38bn for Stangen, but Abil’s BEE shareholders, Hlumisa and Eyomhlaba, thought they were being fleeced as Stangen produced half-year profits of R786m. The shareholders wanted at least R4bn for Stangen to recover something of the R1.5bn they had lost over the past nine years.
The sale of Stangen would have realised about R2.6bn for Abil shareholders if cash at Stangen is taken into consideration. The BEE shareholders, although they believe they are not the spoilers, essentially torpedoed the deal. They knew they stood to get nothing from Stangen and decided to play hard ball. Essentially, close to R1bn would have gone to the creditors and another R1.3bn would have gone to preference shareholders.
However, it seems that the parties who wanted the Stangen deal to go through for R1.38bn underestimated the hand of the BEE shareholders. Because Hlumisa and Eyomhlaba had already lost R1.5bn, they felt business rescue was aimed at helping creditors rather than ordinary shareholders.
Winterboer is not a loser. But the African Bank “good bank” has lost out on making close to R1bn in capital in the first two years, which is what Stangen was expected to bring in.
In Winterboer’s words: “The capital expectation over the first two years was a R955m contribution through recapitalisation of the bank. After taking account of other impacts of not needing to fund the acquisition of Stangen, the actual capital reduction is of the order of R640m, which will be compensated by the good bank taking a larger amount of cash across from the existing African Bank.”
Winterboer felt it was better to make an arrangement with another insurer to underwrite the unsecured loans advanced by African Bank, as he could not afford delays. That is his choice. He could not be forced to buy something he felt was too expensive.
http://www.bdlive.co.za/opinion/columnists/2015/10/20/reserve-bank-should-act-on-absas-interest-mistakes