The Bank of Namibia (BoN) has filed a High Court application seeking to liquidate Trustco Bank Namibia (TBN), which it claims to be commercially insolvent.
This was after the banking concern, owned by Trustco Group Holdings (TGH), had approached the High Court to review several directives and decisions issued by the Bank. Trustco claims that during the last two years of correspondence between Trustco Bank, Trustco Group Holdings, and the Bank of Namibia, the central bank has denied Trustco the opportunity for its bank to enter full commercial banking operations, even after the group offered to capitalise on the bank’s balance sheet by a further N$1 billion.
Trustco claims the Bank of Namibia’s directives and opinions were unconstitutional.
In the case that they lodged, Trustco Bank and the Trustco group are also claiming that sections of the Banking Institutions Act of 1998 are unconstitutional, as they violate the constitutional prohibition of unfair discrimination and Trustco Bank’s right to carry on its business
However, BoN Governor Johannes !Gawaxab said the liquidation application culminates from a series of regulatory engagements and interventions that have failed to restore TBN’s governance and viability to acceptable regulatory levels since 2020.
“Some of the shortcomings identified over this period and not satisfactorily resolved by TBN and its shareholders include severe flaws in the bank’s risk management practices and systems, its failure to maintain liquidity ratios within the prescribed ratios, and a failure to comply with agreed upon directives to re-capitalise the institution.
“The primary goal of the legal action by BON is to preserve the trust and confidence in the financial sector, and more particularly that of Namibian banks.”
The BoN Governor said the decision to wind up the bank was taken after TBN was found to have insufficient capital to recapitalize the bank despite its claims that a N$1 billion recapitalization plan had been rejected by the central bank.
“TBN continues to operate without an approved viable business plan and sufficient capital to carry out the plan, which is vital for the viability and sustainability of the business and is expected of all industry players. Therefore, the primary purpose of the winding up application is thus to protect TBN’s depositors and creditors and to ensure that non-compliance with the applicable laws does not pose any further risks,”!Gawaxab said.
“More recently, however, TBN furnished BON with financial projections and a business plan which it claimed would secure a sustainable turnaround of TBN. Contrary to what is claimed, BON did not decline any offer of capitalisation of TBN by TGH but in response, gave a detailed analysis of the proposed business plan and the reasons why BON regarded the plan as inadequate.”
Trustco Bank Namibia has been operating in the Namibian market since December 2016, when it was granted a commercial banking license by BoN after acquiring Fides Bank.
