Habib Overseas Bank under curatorship for governance failures

Finance Minister Enoch Godongwana has placed Habib Overseas Bank under curatorship to deal with governance and operational failures, while other banks in the “healthy and robust” local banking sector are unlikely to be impacted.

Habib Overseas has five branches including Oriental Plaza, Laudium, Lenasia, Cape Town and Durban.

Godongwana said the curatorship was not related to recent difficulties with banks in the US and Switzerland, and that Habib Overseas Bank was also not related to Habib Bank AG Zurich (HBZ), which also operates in South Africa, but is a different bank and not under curatorship.

The curatorship followed recommendations by the Prudential Authority (PA) of the SA Reserve Bank (SARB). In May last year, SARB also put the small bank Ubank under curatorship due to concerns about it’s capital adequacy, corporate governance and internal controls.

Godongwana said Habib Overseas Bank remained liquid and would continue to operate through the curatorship, subject to the assessment of the curator. He said it’s liquidity coverage ratio was above regulatory requirement, and there were no immediate concerns for depositors.

Habib Overseas Bank is a small financial institution that was licensed as a bank by the SARB in 1990. It provides, among others, term loans, overdrafts, mortgages, bills of exchange and credit facilities to customers in South Africa.

The minister said in a statement yesterday over the past four years, the PA had intensified its supervision of the bank because of weaknesses in governance process, its internal controls as well as investigations and reviews that had confirmed non-compliance with various financial regulations.

This non-compliance was also related to “significant findings” relating to breaches of exchange control regulations, he said.

“Having duly considered 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 as required by the (regulations), the finance minister on a recommendation from the PA decided to place Habib Overseas Bank under curatorship with immediate effect. This is being done to proactively protect the bank’s depositors,” the statement said.

PricewaterhouseCoopers (PwC) was appointed curator, with Craig du Plessis as the representative of PwC who would be responsible for the bank.

Habib Overseas Bank is the local unit of a bank in Pakistan. In 2017, Gupta business associate Salim Essa and another businessman Hamza Farooqui tried to buy Habib Overseas Bank at a time when South africa’s major banks refused to do business with the Guptas, who at the time faced allegations of money laundering.

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