Habib Overseas Bank, the local unit of a Pakistan-based lender, has been placed under curatorship due to governance, compliance, and operational failures.
In a statement on Monday, the Reserve Bank confirmed that Finance Minister Enoch Godongwana has placed the lender on curatorship based on the recommendation of the Prudential Authority (PA), a financial regulator within the central bank’s authority.
Reserve Bank spokesperson Ziyanda Mtshali said the PA had identified weaknesses in the lender’s governance process and its internal control environment over the past four years.
She said investigations and reviews revealed that Habib Overseas Bank was not adhering to financial sector regulations, including South Africa’s exchange control rules.
Mtshali said: “Having duly considered the continuing failure of the bank’s board of directors and management to deal effectively with the weaknesses in controls and its poor regulatory compliance, as well as the growing risks over its ability to meet future obligations as required by the Banks Act 94 of 1990 and the regulations relating to banks, the minister of finance, on a recommendation from the PA, decided to place Habib Overseas Bank under curatorship with immediate effect.
“This is being done to proactively protect the bank’s depositors.”
The minister has granted Craig du Plessis, a representative of PricewaterhouseCoopers, full authority as conferred by the law to carry out his responsibilities as curator effective immediately.
Mtshali said the curatorship will provide a legal framework for implementing the necessary measures to achieve an orderly resolution of the bank’s issues.
“Upon the appointment of a curator, the board and management of Habib Overseas Bank have been relieved of all their powers, which are now vested with the curator, subject to the supervision of the PA.
“Any other person vested with the management of the affairs of the bank shall be divested thereof. Habib Overseas Bank will continue to operate during the period of curatorship, subject to the assessment of the curator.
“The curator will assume the powers of the board and management and will make decisions regarding the bank’s continued granting of loans and sound banking activities generally.
“The curator is also required to recover and take possession of all the assets of Habib Overseas Bank.”
Mtshali stated that, despite being placed under curatorship, Habib Overseas Bank remains solvent, and there are no immediate worries for depositors. She also reassured the public that the situation would not impact other South African banks.
“Habib Overseas Bank remains liquid, with a liquidity coverage ratio above the regulatory requirement, and there are no immediate concerns for depositors, which means their funds remain safe at the bank.
“The curator will keep customers informed of any significant new developments at the bank.
“South Africa’s banking sector remains healthy and robust, and it is unlikely that other South African banks will be negatively affected by Habib Overseas Bank’s current situation.
“The governance challenges and reasons for this curatorship are not related to the recent difficulties with banks in the United States and Switzerland,” Mtshali said.
Habib Overseas Bank is a relatively small financial institution that obtained its licence as a bank from the Reserve Bank in 1990. Its services include term loans, mortgages, overdrafts, credit facilities, and bills of exchange to clients within South Africa.
The bank is not affiliated with Habib Bank AG Zurich, which also operates in South Africa but is a separate entity that is not subject to curatorship.
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