The Prudential Authority (PA) and the South African Reserve Bank (Sarb) launched proceedings in the High Court on 21 July for an order for the final winding up of Habib Overseas Bank Limited (HOB).
The application will be heard on 8 August or as soon thereafter as determined by the High Court.
Minister of Finance Enoch Godongwana, on the recommendation by the PA, placed Habib Overseas Bank under curatorship on 26 March, citing governance, compliance, and operational failures and the need to protect the bank’s depositors.
Read: Habib curatorship unrelated to overseas banking crisis, says Sarb
“Since the curatorship, in-depth assessments and analysis undertaken by the curator found that HOB’s financial position was significantly worse than that reported by the bank’s management. The findings by the curator concluded that HOB is insolvent,” the Sarb said in a statement.
In accordance with the requirements of the Banks Act, Craig du Plessis, the appointed representative of the curator of HOB, notified the PA that there was no reasonable probability that the continuation of the curatorship would enable the bank to pay its debts or meet its obligations and become a successful concern. The curator also recommended an investigation into the affairs of HOB.
HOB’s total assets are significantly less than its liabilities. In the curator’s view, it is highly unlikely that HOB will be able to attract an alternative equity investor to recapitalise the bank, the Sarb said.
The curator has also highlighted serious concerns about HOB’s ability to function effectively as a banking institution and has found its business model to be unsustainable.
In light of this, a decision was taken by the PA and the Sarb that it would be in the best interests of the creditors of HOB, which in the main are its depositors, for HOB be placed in final winding up as a matter of urgency. This would allow a liquidator to preserve the bank’s assets for the benefit of its creditors and to undertake the necessary investigations into the affairs of HOB, the Sarb said.
In June, the Sarb, with the support of National Treasury, announced a mechanism whereby qualifying depositors of HOB could be repaid up to R100 000 per depositor. This process is being facilitated by designated First National Bank branches. This mechanism remains in place, notwithstanding the potential liquidation of HOB.
The payments are being paid by the Sarb, not by HOB. Depositors with more than R100 000 in their accounts will continue to have a claim against HOB for the remaining balance after the payment of R100 000.
It was estimated that 70% of the bank’s eligible depositors would be able to withdraw all their funds in terms of the payment plan.
