Dispute over R2.2bn to aid Ithala

National Treasury says its role is to protect customers, not bank

- THAMI MAGUBANE

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

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 the Treasury over the guarantee, it resolved to give the guarantee to the SA Reserve Bank instead of the province.

The Mercury understands that opinions differ on what the guarantee is for and how it should be utilised.

The province believed it could 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 it 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 (RA). Its functions have been taken over by the RA.