• The recent curatorship of African Bank has forced policy makers to relook at the provisions of the Banks Act, 1990, which deal with curatorship. Section 69, which empowers a bank to enter curatorship, has proved to contain barriers to successful and decisive action by the curator. As a result, the Minister of Finance has proposed the Banks Amendment Bill [B17-2014] (the “Amendment Bill”) which seeks to address two aspects of section 69 which hinder the curator’s ability to resolve the woes of a distressed bank.   
  • A curator is currently permitted to dispose of assets of a bank under curatorship, provided that such disposal will enable the bank to pay its debts or meet its obligations and become a successful concern. The concern is that, in the context of a failed bank, the requirement that the disposal results in the bank becoming a “successful concern” is both illogical and unduly stifling.  
  • The Amendment Bill proposes that the curator be entitled to effect the transfer of assets in circumstances where there exists a reasonable probability that the transferee entity would be able to meet the transferred liabilities, and that the bank’s creditors would not incur greater losses as a result of such transfer than if the bank had been wound up. This amendment would expand the basis on which a curator may dispose of all or part of the business of a bank to enable an effective resolution of a bank under curatorship.  
  • The second amendment relates to a bank’s corporate shareholders. The curator is currently empowered to make decisions on behalf of shareholders during the course of management of the bank, but this does not extend to corporate shareholders. The amendment seeks this extension. It proposes that the curator be enabled to raise funds and provide security over the assets of the bank to secure such funds. It further proposes that the stay on the institution of legal proceedings against a bank under curatorship is lifted in relation to such security, after a period of one year from the provision of the security. The curator should be allowed to decide on the best course of action for the bank under his or her management.  
  • Removing the constraints on a curator, within reason, would assist the curator to be more decisive in making decisions aimed at restoring the bank. The proposed amendments are aimed at enabling the more effective resolution of a bank under curatorship. This Amendment Bill has not yet been signed into law, and the Standing Committee on Finance intends holding public hearings on the Amendment Bill.  
  • The Amendment Bill can be accessed here.