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TRUSTCO Group Holdings (TGH), the owners of Trustco Bank Namibia (TBN), have allayed fears over the security of depositors’ money after the Bank of Namibia (BoN) threatened to liquidate them through a high court challenge for failing to meet regulatory benchmarks.
TGH yesterday released a statement saying all depositors’ funds are well secured with N$25 000 per head.
The BoN, which regulates the banking financial sector, earlier this week said it is taking the High Court route to seek liquidation after TGH failed to meet regulatory expectations..
This was after TBN first approached the High Court to allow the institution to function as a fully fledged bank in Namibia.
The BoN issued a statement in which governor Johannes !Gawaxab said the push for liquidation is the result of a series of regulatory engagements and interventions which have failed to restore TBN’s governance and viability to acceptable regulatory levels since 2020.
This was in response to a statement issued by Trustco on Monday, claiming the BoN denied an offer by TGH to capitalise TBN in an amount of N$1,0 billion
“Some of the shortcomings identified over this period and not satisfactorily resolved by TBN and its shareholders include severe flaws in the bank’s risk management practices and systems, its failure to maintain liquidity ratios within the prescribed ratios, and a failure to comply with agreed-upon directives to re-capitalise the institution,” said !Gawaxab.
TBN has been operating in the Namibian market since 2016.
!Gawaxab said TBN is viewed as commercially insolvent by the BoN board.
Trustco Bank’s review application was for the regulator to set aside certain directives the BoN has made against the TBN, as well as declaring certain sections of the Banking Institutions Act of Namibia unconstitutional.
Trustco claims the BoN’s directives and opinions were unconstitutional.
In the case they lodged, Trustco Bank and the Trustco Group are also claiming that sections of the Banking Institutions Act of 1998 are unconstitutional, as they violate the constitutional prohibition of unfair discrimination and Trustco Bank’s right to carry out its business.
Trustco Group managing director Quinton van Rooyen says Article 101 of the Constitution compelled the parliament to take into consideration economic growth when it enacted the Banking Institutions Act.
“Not once, not even a single time, did the parliament use the concept of economic growth in any of these acts,” according to Van Rooyen.
“In fact, the long title of the Banking Institutions Act emphasises only ‘control, supervision and regulations’. The ‘developmental mindset’ is detrimental to economic growth as well as wealth creation for all Namibians,” he said in Trustco’s statement.
The BoN retaliated in the local media by threatening to bring an application for liquidation against TBN.
The expected application for liquidation has not been served on TBN as of yet.
TGH spokesperson Neville Basson says the bank is commercially solvent and that no client of TBN would need to use the Namibia Deposit Guarantee Authority, which provides a guarantee of N$ 25 000 per depositor.
“All TBN client deposits are 100% backed by cash and can be returned at the client’s request.
“TBN clients are invited to contact the TBN help desk to collect their deposits should they wish to transfer their balances to any other entity. All clients with TBN loans are advised to continue servicing their loans until otherwise informed,” he says.
According to Trustco, the case against the central bank was filed at the Windhoek High Court last Friday.
Reacting to the announcement, Bank of Namibia spokesperson Kazembire Zemburuka said the central bank would “vigorously defend” its regulatory actions.
“The financial system remains stable and sound due to the effective regulatory and supervisory framework in place, which fosters a world-class financial system,” Zemburuka said.
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