By Lehlohonolo Lehana.
Prudential Authority (PA) at the South African Reserve Bank (SARB), placed Habib Overseas Bank Limited (Habib Overseas Bank) under curatorship to deal with its governance, compliance and operational failures.
Habib Overseas Bank is the local division of a lender that was originally founded in India in 1941 before relocating to Pakistan, and is not linked to Habib Bank AG Zurich, which also operates in SA.
In a statement on Monday morning, the SARB said the PA had identified weaknesses in the bank’s governance process and its internal control environment over the past four years.
It added that “various investigations and reviews” found that Habib Overseas Bank was flouting financial sector regulations, including SA’s strict exchange control rules.
“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,” it said.
Habib Overseas Bank made the news six years ago when Vardospan, a company linked to Gupta associate Salim Essa, tried and failed to buy a controlling stake in the bank for about R450 million.
Vardospan went to court in early 2017 in an attempt to force the SARB, and the registrar of banks to rule on whether it could buy the stake before the purchase offer from Habib’s parent company ran out.
While the Competition Commission had given the merger between Vardospan and Habib the green light, the deal effectively stalled after the court threw out Vardospan’s urgent bid.
The SARB described Habib Overseas Bank as a “small financial institution” that was first licensed as a bank in SA in 1990. It has five branches in SA and about 90 employees.
It will continue to operate during the period of curatorship. PwC has been appointed as the bank’s 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,” said the central bank. “The curator is also required to recover and take possession of all the assets of Habib Overseas Bank.”