Proposed changes to the curatorship process will allow the transfer of all or a part of a bank’s business to another entity (this would be done as a transfer under s54 of the Banks Act).
When African Bank Investments Limited (ABIL) was placed under curatorship on 10 August 2014, it was announced that some of its assets and liabilities are to be transferred to a successor entity commonly referred to as the “good bank” to keep that part of the business separate and protected from the “bad bank”. At the time of this split between the good bank and the bad bank, the creation of the good bank and transfer of business was based somewhat on a fiction.
If the proposed amendments in the bill are enacted, it will give a curator a legitimate statutory basis for transferring parts of the business of a failing bank to a successor entity. The bill has been tabled in Parliament to incorporate these new provisions into s69 of the Banks Act so that in addition to the curator’s existing powers, a curator will be able to transfer any of the troubled bank’s liabilities or dispose of any of the troubled bank’s assets in the ordinary course of the bank’s business. The transfer or disposal must be done in accordance with the standard s54 transfer procedure in the Bank’s Act.
Now, when considering the curator’s report, the Minister (who will have to approve any s54 transfer), can consider public confidence in the banking sector in the Republic.