By Lehlohonolo Lehana.
The Financial Sector Conduct Authority (FSCA) has suspended the licence of Ithala Limited – a KwaZulu-Natal-based state-owned development bank.
The FSCA announced in a statement on Friday afternoon that Ithala’s suspension is effective from 26 July 2024 and will remain in place until the bank meets the conditions for its licence to be lifted.
Ithala, authorised as a Category I FSP, came under scrutiny during the FSCA’s ongoing supervision, which found that the institution failed 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) of the Determination of Fit and Proper Requirements (Board Notice 194 of 2017).
The FSCA underscored the critical importance of solvency for FSPs, noting: “It is imperative that FSPs comply with the requirements of the FAIS Act, which 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 Authority explained that the solvency requirements ensure that an FSP can meet unforeseen liquidity needs and, if necessary, undergo an orderly resolution without jeopardising the interests of clients or stakeholders.
The suspension prohibits Ithala from engaging in new business activities under the FAIS Act. However, the company has been tasked with working with clients and product suppliers to transfer any outstanding business to another authorised FSP.
However, the Zulu King Misuzulu KaZwelithini expressed his extreme dismay on being informed that the (FSCA) has suspended the banking licence.
In a statement issued by the office of the king, on Sunday, it says His Majesty is concerned that the suspension of the bank’s licence will have devastating consequences on the livelihood of thousands of his subjects who depend on the bank to conduct their business and social enterprises.
The king then directed his traditional prime minister Thulasizwe Buthelezi to reach out to the Minister of Finance and the Premier of KwaZulu-Natal for them to ensure that no effort is spared to reinstate the banking licence of the bank without delay.
The statement further stated that the king strongly believes that the services of the bank as the backbone of rural and township entrepreneurs in KwaZulu-Natal must not be disrupted.
“His Majesty views Ithala Bank as the enduring legacy of his erstwhile Prime Minister, Prince Mangosuthu Buthelezi — a legacy that must be honoured and defended so that future generations can also benefit from Ithala Bank,” concludes the statement.
Ithala turned to the Financial Services Tribunal for reconsideration of the FSCA’s decision and simultaneously applied for the interim suspension of the decision pending this, however, the tribunal dismissed the interim application on August 22.