POLL | How should government compensate Ithala Bank clients?

The sudden freezing of Ithala Bank accounts has left many of its 257,000 clients in a precarious financial situation.

With the Prudential Authority filing for the provisional liquidation of Ithala SOC Limited, clients have been left without access to their funds, creating a dilemma for depositors and government.

Ithala, which operated under a temporary exemption from the Banks Act, failed to meet the requirements for a banking licence, leading to its inability to legally continue deposit-taking activities after its exemption lapsed in December 2023.

The decision to place Ithala under provisional liquidation aims to protect depositors, with insolvency laws set to help recover and distribute funds.

However, many clients, including more than 76,000 Sassa beneficiaries, find access to their savings and essential funds suspended.

While finance minister Enoch Godongwana has confirmed the SA Reserve Bank will assist Sassa beneficiaries by moving them to a commercial bank, National Treasury will be required to put up a financial guarantee. This signals government’s willingness to support those affected by the crisis.

Government faces the urgent question on whether this may be another VBS Mutual Bank scandal waiting to happen.

TimesLIVE