FSCA suspends Ithala Bank’s license

Senior management of Ithala Bank has called for calm following the decision by the Financial Sector Conduct Authority (FSCA) to suspend its license to trade as a financial service provider. This means that the institution will no longer offer insurance policies to new clients until the matter has been resolved.

The bank says existing clients will not be affected by this decision. This came out during a media briefing held in Durban by KwaZulu-Natal MEC for Economic Development Musa Zondi and the management of Ithala.

Ithala was established in the late 1950s to help the government promote economic development and empowerment. The institution offers various financial services such as business finance and banking.

For the past several years, the institution was exempted by the FSCA from meeting certain financial requirements in order to fully operate as a banking institution. The exemption has since expired.

“We are in a terrain where we are holding bank deposits but we are no longer having the instrument that gives us cover to operate and mimic a bank and that’s the main reason that today we are sitting here because that equation which all banks enjoy for them to be exempted, we cannot enjoy it because we do not hold the initial exemption that we had,” says Dr Thulani Vilakazi from Ithala Bank.

The institution has assured its clients that it’s still financially sound and that their funds remain safe.

“For the past 10 years, Ithala has had an unqualified audit which tells you that Ithala is financially sound and if you go into typical ratios of banking, go for instance to the ratio of capital adequacy requirement which shows whether you have enough money to satisfy the requirements of a bank institution, over the years Ithala has always exceeded that requirement,” Vilakazi added.

The Provincial Department of Economic Development says the matter will be escalated to both the Minister of Finance and the President to give direction on the way forward.

MEC Zondi says a change in policy has caused the impasse.

“All these problems will be sorted out when the interest of the national government, the political interest of the national government can be aligned with the political interests of the provincial government after all we are one country and we see no reason why one sphere of the government should fail to enable another sphere of government to transact its own business,” says Zondi.

The institution says existing insurance holders will be moved to its holding company, the Ithala Development Finance Corporation to carry out this suspended function.

Video: Ithala Bank – Financial Sector Conduct Authority suspends banking license: Khaya Sithole