KEY POINTS
- Ithala Bank seeks access to R863 million ($47.6 million) to pay staff.
- The South African Reserve Bank froze the bank’s accounts in January.
- Court decision pending on whether social grant funds are deposits.
Ithala Bank has urgently approached the Pietermaritzburg High Court to request access to R863 million ($47.6 million) in frozen funds, which the bank claims is crucial to paying its staff.
The South African Reserve Bank’s (SARB) Prudential Authority (PA) suspended the bank’s activities, freezing its accounts in January 2025.
The matter was heard on Monday by Judge Muzi Ncube in the Durban Labour Court, where Ithala Bank sought permission to access the funds temporarily, pending a final decision from the Supreme Court of Appeal.
Ithala’s legal counsel, Sandile Khumalo SC, argued that withholding these funds would cause significant harm to the bank’s employees and depositors.
Khumalo assured the court that the bank would not engage in deposit-taking activities during this period and that no new deposits would be accepted.
The bank only requested access to funds already in its accounts, which it argues is necessary to maintain essential operations, including paying staff salaries.
Court battle over Ithala’s insolvency continues
The PA has argued that Ithala Bank is insolvent, which led to the suspension of the bank’s activities.
The PA claims that the bank’s financial instability puts the depositors’ funds at risk.
In response, Ithala’s legal team rejected the PA’s assertions. They stated that their staff had no involvement in the issues of non-compliance and that they should not be punished by delayed salary payments.
Additionally, Ithala Bank has asked the court to clarify whether social grant funds paid by the South African Social Security Agency (SASSA) to the bank should be classified as deposits.
According to IOL, this would affect how funds are treated, potentially allowing the bank to access the money.
Opposition to Ithala’s application, concerns about deposits
The RA’s lawyer, Etienne Threon SC, argued against Ithala’s application. He emphasized that the frozen funds still belong to the depositors.
Threon reiterated that the PA’s role is to protect the interests of depositors. This includes ensuring the proper handling of taxpayer-funded social grants.
KwaZulu-Natal Finance MEC, Francois Rodgers, also attended the proceedings.
He stated that while past actions by Ithala Bank may have been unlawful, he opposed the bank’s closure.
Rodgers called for a solution that protects both the province’s interests and the depositors.
The court has reserved judgment. Ithala Bank will have to wait for the final decision before proceeding with its operations.
