1999-11-03: Media release by Mr Tito Mboweni, Governor of the Reserve Bank, on the findings of the special investigating unit into the Financial Aid Package to Bankorp/Absa
Last Modified Date:
2020-10-08, 08:16 PM
Media > Media Releases
The South African Reserve Bank has noted the findings of the investigation by the Special Investigating Unit into the financial assistance package to Bankorp/Absa by the Bank.We are pleased that the investigation has been concluded and that, as far as the Special Investigating Unit is concerned, the matter has been put to rest. I would like to add that, contrary to speculation in the media, the Reserve Bank did not place any pressure on Judge Heath to decide against litigation. On the contrary, it was of the utmost importance to us that the investigation should run its course without interference, before we considered the implications, if any, for the Reserve Bank and the banking system. The unit has alleged that the financial assistance package was not authorised by the Reserve Bank Act, and that the guidelines for financial assistance by the Reserve Bank to banks are inadequate. We regard these findings in a very serious light indeed. From my briefings so far it appears that the South African Reserve Bank operated within the ambit of the law. However, since the investigation by the Special Investigating Unit has cast public doubt on the Bank’s actions, it is imperative in the interests of good management that we obtain an independent assessment of what happened.Hence I shall ask the Board of the Bank, when it meets next week, to approve a Reserve Bank review of the internal processes and procedures followed when this assistance was extended to Bankorp/Absa. We envisage that experts from outside the Bank will be involved in such a process, which we are convinced is necessary given that questions have arisen over the legality of the Bank’s actions. We have also noted that the role of the central bank as lender of last resort to the banks has been called into question in South Africa, even though it is internationally accepted for central banks to play this role. Therefore, I shall ask the Board for permission to constitute a panel of South African and international experts to study the role of the central bank as lender of last resort. The panel should test our understanding of what international best practice is, and how it is expressed in the South African Reserve Bank Act. The advice of the panel should guide our future decisions on financial assistance packages to private banks, if the need should arise to provide such assistance.The findings of the study by the panel of experts should ideally be debated by the Parliamentary Joint Standing Committee on Finance, to enable public participation and debate and to arrive at a consensus on best practice.