Whispers from inside the wreckage of VBS Mutual Bank suggest the bank’s rapid disintegration is far dirtier than anyone could have suspected. On March 11, the small bank, which first opened its doors as the Venda Building Society in 1982, was put under curatorship. It had 23,000 clients including 7,688 stokvels. Eleven days later, new curator Anoosh Rooplal wrote a starkly apocalyptic report, revealing that the bank’s accounts might as well have been conjured up by former Steinhoff CEO Markus Jooste over a bottle of merlot.
Rooplal’s findings included that the R1.8bn held in VBS’s suspense accounts “may be a fictitious creation of deposits on the banking system”, there were possible “fraudulent transactions” designed to siphon money from the bank, and nine of its largest 20 borrowers weren’t repaying their loans. To make it worse, VBS’s liquid cash was just R24.7m — even though the ostensible deposits with the bank were supposedly R2.9bn. Then again, who really knew? Rooplal wasn’t able to confirm whether R900m in corporate deposits even existed.
To sift fact from fiction, banking registrar Kuben Naidoo hired advocate Terry Motau to conduct an investigation, which is ongoing. His report, due within months, is likely to form the basis of any further action by government — including possible criminal charges.
This week, Naidoo told the FM that it has been confirmed that there indeed were “fictitious deposits” in VBS’s books. Rooplal concurs, saying that based on the preliminary results he’s seen, “it seems that [money was] moved out of the bank”. It’s an intriguing revelation, and the spotlight now turns to how, even if there were rogue executives, the bank was able to get away with it.
There seem to be two places to focus, seen intuitively: either auditors KPMG botched their job spectacularly, or they did indeed warn the Reserve Bank of what was happening, and the bank ignored the red flags.
Read the rest of Rob Rose, editor of the Financial Mail.