Curator extends closure of Habib bank

Habib Overseas Bank, the local unit of a Pakistan-based lender that was placed under curatorship earlier this week, will remain closed until further notice.

Curator Craig du Plessis informed staff, customers and other relevant stakeholders on Wednesday that the bank will remain closed until further notice, effectively extending the initial 72-hour precautionary closure meant to prevent a run on deposits.

Finance minister Enoch Godongwana placed the lender, which received an SA banking licence in 1990, under curatorship on March 26 due to governance, compliance and operational failures. The curatorship was based on the recommendation of the Prudential Authority (PA), the financial regulator that falls under the authority of the Reserve Bank.

“We are still in the process of assessing the financial status of the bank and are committed to finalising this work as soon as practically possible,” said Du Plessis, who is head of restructuring services at PwC, the audit firm appointed by Godongwana to oversee the curatorship process. “This action has again been taken to protect all stakeholders of the bank.”

Du Plessis’s action means the branches and all operational aspects of Habib Overseas Bank will remain closed until the curator is able to provide further updates. Nevertheless, customers with loans and other credit facilities from the bank are still legally obliged to continue paying monthly instalments.

The PA said in a statement on Monday that Habib Overseas Bank was placed under curatorship due to its poor regulatory compliance and because its board of directors and management failed to deal effectively with weaknesses identified in its operational controls. The regulator said this posed a growing risk to its ability to meet future obligations as required by the Banks Act.

Habib Overseas Bank first came under the spotlight in November 2016 when the Mail & Guardian reported that it had become the target of an audacious buyout attempt by individuals linked to the Guptas, the notorious family originally from India that has become synonymous with state capture.

The newspaper reported that Salim Essa — a business associate of the Guptas who held stakes in Gupta-linked VR Laser Services, Tegeta Exploration & Resources and a company called Vardospan — and Hamza Farooqui had offered to buy Habib Overseas Bank’s SA assets for R450m.

At the time, the Guptas were struggling to access financial services after four of SA’s largest banks closed their business accounts after allegations of illicit financial activity mentioned in then-public protector Thuli Madonsela’s report on state capture. The Competition Commission approved a proposed merger between Vardospan and Habib Overseas Bank in January 2017, though the proposed deal rested on regulatory approval being granted.

On March 31 2017, the Pretoria high court struck down an application by Vardospan to compel the Reserve Bank, the Treasury and the registrar of banks to approve the deal, scuppering the merger plan. A day earlier it had emerged that thenfinance minister Pravin Gordhan had been fired by previous president Jacob Zuma, himself an associate of the Guptas.

Habib Overseas Bank is the local division of a lender founded in India in 1941 before relocating to Pakistan, and is not linked to Habib Bank AG Zurich, which also operates in SA.

THIS ACTION HAS BEEN TAKEN TO PROTECT ALL STAKEHOLDERS OF THE BANK