African Bank: A disgraceful failure of the regulatory system

Everyone is quick to blame the management of African Bank for their failures, and rightly so. I have already pointed out some of their failures here.

But much of the blame should be put on the regulators.

We supposedly have one of the best regulated financial systems in the world, yet African Bank’s troubles of the past 3 years were not picked up by anyone in government, by anyone at the reserve bank, or even by their own auditors. The ‘system’ has failed the shareholders, management, employees, and clients who are dependent on the company.

Has the reserve bank been asleep for the past 3 or 4 years? What is the point of having a registrar of banks if they can’t regulate? We have seen dozens of articles and comments over the past week stating that this crisis was entirely foreseeable. Yet no one in government, and no one at the privately owned reserve bank saw this coming and sounded the alarm bells.

In our opinion, the financial statements present fairly, in all material respects, the financial position of African Bank Limited as at 30 September 2013, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. ~ Deloitte Audit Team

The auditors opinion is blatantly incorrect. It came out mere months later that the provisions for bad debt were entirely underestimated. Whether this is due to incompetence or fraud is a good question. It misled shareholders credit providers. Surely SAICA should hold an enquiry and take action? The prestigious ‘Chartered Accountant’ title is being brought into disrepute.

South Africa’s banking sector remains healthy and robust. There have been no indications that other South African banks have been affected negatively by ABIL’s trading update or African Bank’s current situation. ~ Gill Marcus

How can we trust this statement? We have witnessed such blatant regulatory failure, yet we should take their word for it that the rest of the sector is ok.

African Bank’s business model is not that complex. It is not like some American investment bank with billions in tangled webs of volatile off-balance sheet derivatives. The business itself is simple, and should be easy to regulate.

If I were an investor, I would no longer place my trust in the unaccountable, politically appointed ‘authorities’.

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Barry Liversage 2014-08-13 02:21:40 PM
Joe V D Merwe 2014-08-13 02:32:33 PM
It is just a crooked way for us taxpayers to transfer money. I have an idea it was planned long ago. They will not even endeavor to recoup the losses. BEE springs to mind.
Malcolm Nicolson 2014-08-13 03:19:22 PM
I got a new cell number, and got called every other day for money owed by the previous owner of the number. The previous owner, by the name I suspect is not South African, they were demanding just over R12 000. I explained I had just acquired the phone number and it was not me. They kept calling for three months, to keep my sanity, I started asking them when they were going to pay me money they owe me, R12 000, which really confused the hell out of the caller demanding I pay. I even threatened them when they called that if they did not pay, I would sue them. My point is, they could not connect the dots that the number they were calling was not of the person they were trying to track down. Only one caller noticed my voice did not match the name type's voice. I think that Africa Bank has a personnel problem from top to bottom, they are in trouble as they have incompetent employees in various positions.
Fired up 2014-08-13 04:16:26 PM
A bail out on the way with every justification in the book why it should be so. Agree the regulators are useless, and that includes the reserve bank. Glad you referred to the privately owned reserve bank Cvh23, too many are under the illusion its a public institution. Disclosing the names of the shareholders is considered not in the public interest as well no doubt.
Mark Gieljoumie 2014-08-13 04:26:15 PM
They are just doing what every other bank around the world is doing: Privatise the profits and nationalize the losses
Clive Pops 2014-08-13 04:33:17 PM
What? You looked at the AFS for 2013 and thought it was good????
Martin Ive 2014-08-13 05:12:58 PM
Bwahahahahahahahah BEEEEEEEEEEEEEE
Sterling Ferguson 2014-08-13 05:47:04 PM
Most experts are saying that China will be the next bank with their banks have loaned billions of unsecured loans.
Songez Kokwe Luda 2014-08-15 07:08:30 AM
Why African bank if a person aply for i.e R1500 loan tell that person he is qaulify for more than that amount he need and he can't get that certain amount of R1500 he rather take that R8000 they offer him , then that person fairl to pay the loan coz he can't afford to pay back so they make huge erers then he end up paing double erors why