Prudential Authority to appeal ruling on Ithala Bank liquidation
The Prudential Authority has suffered a legal setback in its efforts to liquidate Ithala Bank.
The regulatory body, tasked with overseeing South African banks, initiated provisional liquidation proceedings against Ithala earlier this year, prompting the freezing of the state-owned bank's accounts.
However, the KwaZulu-Natal (KZN) High Court in Pietermaritzburg delivered a ruling last week allowing Ithala to fully resume its operations.
The institution, which falls under the South African Reserve Bank (Sarb), has since confirmed its intention to appeal the ruling.
Prudential Authority to appeal Ithala Bank judgment
Repayment administrator Johan Kruger is also set to challenge the judgment through an appeal.
'It is important to note that the RA has, in any event, complied with the court's prior order not to take control of Ithala's non-deposit-taking operations.
'However, the RA has been unable to isolate depositor funds from other funds as Ithala has never maintained a separation between its deposit-taking activities and its other business operations,' the institution's statement reads.
ALSO READ: KZN Treasury unhappy with Godongwana's R2bn guarantee to Ithala depositors
The Prudential Authority further clarified that the court's judgment pertains only to Kruger's role and does not affect the broader liquidation application, which remains pending before the same court.
'The PA awaits the finalisation of the liquidation application.'
The authority emphasised that its primary responsibility is to protect the interests of Ithala's depositors.
'In this context, while the PA understands the frustration and difficulty this situation may cause for depositors, the freezing of accounts remains a necessary and prudent step to safeguard the depositors' remaining funds.
'This measure aims to ensure a fair and lawful distribution process of depositor funds while awaiting the outcome of the liquidation application.'
KZN government backs Ithala, criticises Prudential Authority
KZN Premier Thamsanqa Ntuli had welcomed the judgment, calling on depositors not to panic or engage in a 'run on the bank'.
'As the KwaZulu-Natal provincial government, we wish to place it on record that we strongly oppose any attempts to interrupt the activities and operations of Ithala Bank.
'We believe the claims made by the Prudential Authority are unfounded and appear to form part of a broader agenda to undermine one of the few financial institutions historically designed to serve marginalised communities in KwaZulu-Natal,' Ntuli said in a statement.
READ MORE: KZN Treasury at loggerheads with Sarb over Ithala
Ithala liquidation
The Prudential Authority is seeking Ithala's liquidation on the basis that the bank has been accepting deposits unlawfully.
The repayment administrator had declared the institution both technically and legally insolvent.
Ithala had historically operated as a bank through several exemption notices issued under the Banks Act, despite never having been granted a formal banking licence.
The Financial Sector Conduct Authority (FSCA) suspended Ithala's licence in August 2024 due to concerns over the institution's liquidity.
The bank's liquidation could affect at least 257 000 clients.
NOW READ: Ramaphosa authorises SIU to investigate Ithala and its employees
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