BoN takes control of SME Bank assets…launches investigation into potentially dubious investments

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Edgar Brandt

Windhoek-In a surprising and drastic move, the Bank of Namibia late yesterday announced that it had taken over the control of the SME Bank’s assets, liabilities and all its business affairs with immediate effect.

The Bank of Namibia, which is the regulator, has also effectively disempowered SME Bank’s board of directors and sacked the top management including chief executive officer Tawanda Mumvuma, along with the general manager for treasury and the finance manager.

In their place, the Bank of Namibia has put up an interim board, and an acting chief executive to carry out the fiduciary duties of SME Bank.

BoN said it had become alarmed at what it deemed possibly questionable investments in South Africa amounting to between N$181 million and N$196 million.

The central bank based the action it undertook on several presentations made by the SME Bank’s board and management to BoN’s board following inspections by the central bank.

“At this point, the Bank of Namibia is not satisfied with the information provided, and is unable to render an objective opinion regarding the soundness or magnitude of the investment in question,” BoN Governor Iipumbu Shiimi said.

The last time BoN was so angered by a commercial bank’s executives and board that it invoked such drastic measures in accordance with Section 56 of the Banking Institutions Act, happened nearly 20 years ago. That was when BoN sacked the board and management of the then black empowerment City Savings and Investment Banks, over its investment and management decisions.

Yesterday Shiimi said that at its ordinary meeting last week Friday the BoN board made the decision to intervene in the affairs of SME Bank, because of questionable investment that did not conform to sound investment principles and that could potentially pose a risk to the stability of the SME Bank.

“In light of this, it is the Bank of Namibia’s considered view that such investments have the potential to cause instability if they are verified to be unsound,” Shiimi said.
However, he emphasised that the SME Bank would continue to operate as it normally did during this time.

Management still in place would continue to make decisions regarding the granting of loans, and banking activities, based on existing policies and procedures.
In addition, SME Bank transactions, including ATM and online platforms would remain available and fully operational.

“The Bank of Namibia appeals to all customers to maintain good standing on their loan repayments and honour their contractual obligations. This will prevent them from being deemed credit-unworthy.

“They are legally bound to repay their debt to the SME Bank and this decision effected today will not impact on their obligations to the SME Bank,” Shiimi warned.

Furthermore, depositors would still have full access to their money and he called on all of SME bank’s customers to remain calm and not to withdraw their cash because of this transactional period.

The interim Board appointed to carry out the fiduciary responsibilities at SME Bank consists of Advocate Dennis Khama, Melani Tjijenda, Ali Ipinge and Manuel Kisting.
In addition, it has appointed Benustus Herunga, a long-serving member of the executive management team at the bank as acting chief executive officer.

Herunga normally served as head of retail banking at the SME Bank. The interim board and the acting CEO are expected to work closely with existing SME Bank staff to ensure it continued to fulfil its mandate.

“The board was disempowered not because we believe they are guilty, but to allow the investigation to go ahead unhindered,” Shiimi said. He added that should any of the SME Bank’s management or board be found guilty the law would take its course to determine the consequences of their actions.

“Namibia’s banking sector remains healthy and stable. It is a sound and resilient, world-class banking system that is highly rated globally. The role of the Bank of Namibia as a regulator, has been and continues to be, to ensure the banking sector contributes positively to the national economy.

“Therefore, the Bank remains resolute about fostering banking system stability and exercises its supervisory mandate in a fair manner at all times,” Shiimi assured the public.

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