The appointment of a curator to oversee the affairs of Saambou last Saturday sparked a second-phase run on the bank by individual account-holders and depositors when the bank re-opened its doors on Thursday.
The first phase of the run started last week when as-yet-unnamed institutions withdrew more than R1 billion in deposits, before the Reserve Bank closed the doors of Saambou and appointed John Louw, of accounting company KPMG, as curator.
Saambou's woes have been exacerbated by account- holders switching their accounts to other banks or holding money in cash. This is despite assurances from Louw, and Christo Wiese, the Registrar of Banks, that any money deposited since Saturday last week is freely available to account- holders.
In Parliament on Thursday, Trevor Manuel, the Minister of Finance, and political parties expressed satisfaction with the way the crisis was being handled to prevent any threat to the wider banking system. As they spoke, there was panic and desperation on the streets as Saambou clients queued to get hold of their money.
Thousands of Saambou's 350 000 account-holders - including elderly people who rely on interest payments - have been left without ready cash. The panic was made worse by ambiguous statements from Louw and Saambou branch managers issuing contradictory rules on withdrawals.
Saambou account-holders are not the only ones to feel the pain. There will be a serious knock-on effect for members of pension funds under the Fedsure umbrella. Fedsure had to be rescued by financial services company Investec last year because of its irresponsible investment strategies.
Fedsure bought a major stake in Saambou and other financial services companies. The shares of the companies lost value, and growth and capital guarantees given by Fedsure were threatened. Fedsure controlled 38 percent of Saambou.
Cairan Whelan, a senior Investec manager who was brought in to sort out Fedsure, says future investment growth could be curtailed, depending on what happens at Saambou.
Saambou account-holders have been given repeated assurances by everyone from Manuel to Wiese that Saambou is not in effect bankrupt, but has cash flow problems.
The basic cause of this is that while deposits taken in by the bank have to be repaid in the short term, money it lends on, for example, homeloans, are repayable over 20 years or longer.
The effects of Saambou's collapse have also been felt by other small banks, even though their financial situation is totally sound.
The lack of confidence was mainly caused by a statement on Friday night from Fitch, a credit rating agency which assesses the financial viability of banks. The statement placed most of South Africa's second-line banks on a "rating watch", thereby expressing doubts about the soundness of these banks, as well as Saambou. Fitch withdrew the rating watch after reaction from the affected banks.
Errol Grolman, of Corpcapital Bank, told Personal Finance that Fitch's attempt to lump all the small banks with Saambou was ludicrous. While there was a significant mismatching of assets and liabilities at Saambou, this did not apply to the other banks, which had liabilities (deposits) well matched with loans, both in amounts and time periods.
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