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VBS Under Curatorship – What Does That Mean?

The South African Reserve Bank took a strong step and placed one of the smaller local banks (VBS Mutual Bank) under curatorship.

Curatorship is when the board and executives who run the show are relieved of duty and a curator is appointed in their place to run things (for a while).

The SARB made the decision after concerns over the financial viability of the bank arose (It can also happen if the board or executives are possibly up to nonsense which threatens the stability of the organisation). The SARB grew concerned that VBS Mutual Bank were facing some serious issues. Sometimes this is because consumers are drawing their deposits out of the bank (leaving it with no money to operate) or because they couldn’t repay the money they owe on it’s own loans. One of the problems which spurred the decision was the incorrect taking of deposits from municipalities in an irregular manner. This was against the law and the bank has to return all the money to the municipalities. This means that suddenly the bank has a lot less cash on hand than before. Thus the concerns and decision to place the bank under curatorship.

Many times when a bank (or other institution) is placed in curatorship is a precursor to liquidation (if it cannot be rescued). Many experts are saying that the current curatorship will greatly assist VBS to turn things around and come out stronger than before.

Management and the board may, however, be facing charges for breaking the law.