Johannesburg - The final report into South Africa’s first bank collapse in 12 years found directors at African Bank Investments Limited (Abil) failed in their duties to manage and protect the lender before its downfall almost two years ago, according to two people who had seen a copy of the document.
The report, compiled by advocate John Myburgh and submitted to the central bank in February last year, criticised the bank’s governance and questioned whether directors were suitably qualified to oversee the chief executive Leon Kirkinis, the people said, asking not to be identified because the report had not been published. No fraud was discovered, they said, without giving details on the report’s recommendations.
Banking experience
At the time of its collapse in August 2014, seven of Abil’s 11 board members had no banking experience prior to joining the lender, according to biographies listed in the 2013 annual report.
Kirkinis co-founded and ran what was then the country’s largest provider of loans not backed by assets from 1999 until he quit on August 6, 2014. That was four days before the central bank appointed managers to take over and nurse its viable assets back to health.
The rescued assets started trading under a new banking licence as African Bank on April 4. Yields on the company’s $280 million (R4 billion) of bonds due October 2020 have declined 86 basis points, since surging to a record high on April 8, to trade at 9.68 percent by 7.34am in Johannesburg.
The Reserve Bank was due to release Myburgh’s report on May 12, the regulator said on its website this week. Thirty-seven people were invited to review and comment on the report, which was also sent to Finance Minister Pravin Gordhan, the central bank said.
The Reserve Bank did not immediately respond to e-mailed requests for comment.
Calls to a cellphone number that used to belong to Kirkinis, and which hasn’t been answered since the lender collapsed, did not connect.
Kirkinis’ lawyer Sharon Wapnick declined to comment on her client’s behalf.
Kirkinis last year started a finance company called UsPlus the Financial Mail reported in its April 21 issue, citing the former chief executive. He did not return a message left with an employee at UsPlus asking that he comment on the report’s findings.
No criminal activity had caused African Bank to fail, so Myburgh did not recommend charges be brought against anyone, the Financial Mail said, citing people with insight into the inquiry.
No charges
Myburgh declined to comment when called about the report’s findings, saying it was up to the Reserve Bank to release his findings and that he was bound by confidentiality agreements.
The central bank asked Myburgh to probe the company for reckless, negligent or fraudulent behaviour, while also investigating management practices and disclosures, according to the inquiry’s terms of reference.
The central bank was compelled to act after the value of soured loans soared and Abil was not able to raise capital. Shareholders lost all of their investments and bondholders were forced to take haircuts following the lender’s collapse.
In court papers lodged last month in the Pretoria High Court, the former directors of African Bank Investments said they were not liable for a R2.03 billion damages claim lodged by minority shareholders who held stock in the lender. The directors said they owed their fiduciary duties to the company and not shareholders.
BUSINESS REPORT