Dispute erupts over R2.2 billion Ithala Bank guarantee as National Treasury prioritises depositors

A DISPUTE has ensued over the R2.2 billion guarantee needed to assist Ithala Bank, with the National Treasury (NT) warning that its primary task is to protect customers and not to bail out the bank.

- THAMI MAGUBANE

The Treasury described its stance as a standard approach it has applied in similar situations to safeguard customers of other embattled financial institutions.

This statement follows revelations that the KwaZulu-Natal provincial government has approached the Treasury to enquire about the guarantee.

Senior management of Ithala recently informed members of the provincial legislature that, despite negotiations with Treasury over the guarantee, it resolved to give the guarantee to the SA Reserve Bank instead of the province.

The province believed they were informed to find a commercial bank to take over the deposits of Ithala, and the guarantee was to help facilitate that process and guarantee that commercial bank, as they would have been taking over a liability.

Ithala Bank, owned by the provincial government, is facing liquidation following an application brought by the Prudential Authority via a Repayment Administrator. Its functions have been taken over by the RA.