KwaZulu-Natal government-owned entity Ithala has moved to allay fears that it was closing shop.
Fear gripped the account holders of the insurance and financial provider when news broke that the Financial Sector Conduct Authority (FSCA) had suspended the licence of the state-owned development bank.
The regulator explained the licence would be suspended effective from July 26 until it has satisfied all required conditions.
Suspension of licence from July 26 case panic
“It is imperative that FSPs comply with the requirements of the FAIS Act. They… are aimed at protecting the interests of financial customers. Solvency is a critical element for the ongoing viability of any FSP. And compliance with the solvency requirements is of utmost importance,” the FSCA said.
It further explained the development. He said the decision was arrived at due to the financial provider failing to meet the financial soundness standards outlined in the FAIS Act.
“Specifically, Ithala was found wanting with compliance with sections 46(1) and 48(1) and (2). These are sections …of the Determination of Fit and Proper Requirements (Board Notice 194 of 2017),” it said.
But Ithala CEO Dr Thulani Vilakazi said the matter was blown out of proportion and created panic unnecessarily.
“This did not clearly specify that customers savings and their money were no affected by the suspension of the licence. It’s business as usual. And we urge our customers to be calm as they will continue to access all services,” Vilakazi explained.
Suspension means no new business
According to the FSCA notice, the suspension of the licence means that Ithala must not enter into any new business. This as required by the FAIS Act. And it must take reasonable steps to ensure that any outstanding business is transferred to another authorised FSP. This in consultation with affected clients and product providers.
The suspension of the Ithala’s licence ruffled feathers within the AmaZulu royal house. AmaZulu king MisuZulu KaZwelithini lamented the development. He said that the imminent closure would have crippling consequences for the impoverished. The King also said many depended on the financial services provider. Especially in townships and rural communities.
Zulu Monarchy raises concerns
“His Majesty strongly believes the services of Ithala bank… must not be disrupted. Especially as the backbone of rural and township entrepreneurs in KwaZulu-Natal. His Majesty views Ithala bank as the enduring legacy of his erstwhile [late] prime minister Prince Mangosuthu Buthelezi. A legacy that must be honoured and defended so future generations can also benefit from the bank,” said the king. He said this through his prime minister Reverend Thulasizwe Buthelezi.
Ithala has long battled to attain a permanent banking licence, only operating with a temporary licence. The bank has ambitions of becoming a fully fledged state bank.
