Trustco Group Holding (TGH) has rushed to the courts seeking for remedial action, as the Bank of Namibia is working towards wind up Trustco Bank Namibia (TBN), saying it is insolvent, and does not have a sustainable business plan.
“BoN’s Board of Directors is of the view that TBN is commercially insolvent at this time. As mentioned before, 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,” said the bank’s governor Johannes !Gawaxab on Wednesday.
!Gawaxab’s revelation comes a day earlier after TGH announced on Monday that they have approached the High Court to have it review the directives and decisions issued by BoN since July. The two have been in a back and forth the past two years deliberating on the operations of TBN, as BoN was giving some recommendation and guidelines to be followed.
“In the aftermath of two years of correspondence and threats between Trustco Bank Namibia Ltd (TBN), Trustco Group Holdings Ltd (TGH), and Bank of Namibia (BON) to enable TBN to enter full commercial banking operations, and after TGH offered to capitalize TBN’s balance sheet by a further N$1 billion and was denied, TBN and TGH unfortunately had no choice but to file a Notice of Motion to Review several directives and decisions issued by BON against TBN since 25 July 2022 in the High Court of Namibia, in Windhoek on Friday 23 September 2022,” said Trustco’s Neville Basson.
BoN hit back saying, “as the regulator of banking institutions in Namibia, BoN has engaged TBN over the past two years in an attempt to ensure regulatory compliance and, ultimately, the financial sustainability of TBN. Measures recommended by the Bank of Namibia to TBN include, amongst others, recapitalisation of TBN, which was not done in full as expected. 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.”
Backed by the arguments, !Gawaxab said Board of Directors after extensive deliberation, decided on the 5th of September 2022, to apply to the High Court for the winding up of TBN in accordance with Section 58 (4) of the Act. “We had no other option than to resolve to wind up. The Bank informed TBN of its decision to pursue legal action on 16 September 2022, before TBN’s launching of the review application. 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 liquidation application is as a result of shortcomings identified since 2020, which TBN allegedly did not satisfactorily resolve. “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,” are some of the factors BoN claimed.
This will be the second time in recent years that the central bank applies for the liquidation of a bank, following the SME Bank shutdown.