African Bank curatorship update

Curatorship Update

Dear STANLIB client,

African Bank (ABIL) has been in the media recently regarding proposed amendments to the Banks Act. You may have been wondering about any potential impact of this on your retention fund.

I would like to provide some context around the matter and offer reassurance regarding your investment with STANLIB.

The future of your retention funds:

  • STANLIB’s decision to create retention funds was to protect all of our investors - both large and small. We stand by this, and continue to believe it was the right course of action. Our outlook on the matter has not changed.

  • National Treasury believes it is necessary to amend the law to empower the Curator to create a new “good bank”. This forms part of a process which should ultimately return some liquidity to the investment assets held in your retention fund.

  • We are closely following the Curator’s progress. He has indicated that he is on track in establishing the new “good bank”.

  • Once it is formed and becomes operational, we should get clarity on the liquidity of the retention assets and when they might be collapsed back into the original funds.

What would the amendment mean?

  • The proposed amendment would allow for a new “good bank” to be formed from selected assets and liabilities of the Bank (ABL) after it was put under curatorship last year.

  • This would allow the Bank’s liabilities / debts to be moved to a new banking entity. Currently the law does not enable the Curator to move good assets and liabilities from ABL into the newly formed “good bank”.

  • Although we support the process followed by the South African Reserve Bank (SARB) and Curator, we want to ensure that any amendments to any laws have the right checks and balances and processes in place that will ultimately protect your rights and interests.

Background and context:

  • This is an industry-wide issue about the effects that a bank’s failure has on all its debt instruments and how it can be dealt with in a curatorship process.

  • The proposed amendment would give a bank curator the power to move assets and liabilities from an affected institution to a new or another institution at the discretion of the curator and the South African Reserve Bank (SARB).

  • The financial services industry shares the concern that it is creating the risk that a curator could fundamentally and unilaterally alter the status of investors’ funds invested in such situations (in the event of a bank failing).

  • As custodians of your funds, we believe it is our duty to protect your rights.

  • This is the reason that the industry is proposing that checks and balances be put in place to ensure that proper valuations are placed on such asset and liability transfers which are fair to all investors.

Where to from here?

  • Our aim in being involved in this legislative process, and talking to National Treasury and Industry Bodies, is to make sure that appropriate checks and balances are in place that will ensure that all of our clients are treated fairly and equitably. We are doing this to protect the rights of all investors and their negotiating ability – both now and in the future. If we did not do this, we believe we would not be doing our job to the extent that you would expect of us.

  • If the legislation goes through, we want to make sure it is drafted correctly and does not prejudice the general principles for creditors’ rights in a bank curatorship process.

I hope this has helped to provide some clarity on the matter, and assure you that we remain committed to your investment with STANLIB. Should you have any further questions or require additional information, please contact your financial adviser or the STANLIB Contact Centre on 0860 123 003.

Regards,

Bongani Mageba

STANLIB Retail MD

*note: ‘ABIL’ is the acronym for African Bank, the holding company. ‘ABL’ is the acronym for the Bank.