Trust Bank challenges DPC

HARARE - Closed Trust Bank Corporation Limited (Trust) has petitioned the Deposit Protection Corporation (DPC) to hold off compensation processes for depositors and the disposal of assets.

This comes as the financial institution has lodged an Administrative Court appeal against its hasty closure on January 7 and successfully challenged regulatory authorities in the High Court for the postponement of its liquidation process by the Reserve Bank of Zimbabwe (RBZ), and its agents.

Although John Chikura’s entity was acting in line with its mandate “to compensate depositors in full or in part... in the event of insolvency of a contributory institution” and, therefore, planning to immediately pay out a maximum insurable figure of $500 to depositors, Trust’s attorneys Gwaunza and Mapota Legal Practitioners have advised the DPC to call off the process until the courts determine its multiple lawsuits.

“The court still has to give an order either confirming you as the final liquidator or setting aside the provisional order,” they said, adding that “your (DPC) powers are therefore limited to the terms of the provisional order given by the High Court.”

In that vein, Trust ordered the key institution to retract “the call to depositors to claim compensation pending finalisation of the High Court proceedings and hold off disposing of any of the bank’s assets in whatever form.”

While the bank is opposing a liquidation process on the grounds that it would not be in depositors’ interests, it also says in its Administrative Court challenge that its licence cancellation or revocation was “premature and the time limit allowed to address its capitalisation issues had not lapsed”.

Crucially, Trust is also arguing that the Finance ministry — as the ultimate appeals board — and other stakeholders had failed to take into account or consideration its ripening discussions with South Africa’s Mining Oil and Gas Services (MOGS).

On the other hand, executives also wonder at the speed with which the Trust wind-down is being pursued and whether the planned asset disposals — to support depositor pay offs — were such a wise move, given the efforts to engage an investor and resuscitate the institution.

In light of its court challenge last week, the High Court not only postponed Trust’s liquidation to February 18, but also accepted advocate Thabani Mpofu’s key argument that depositors “were unlikely to support” an outright closure of the institution, hence it was given an opportunity to make further representations for its fresh capital investment-hunt.

“We applied for the postponement of the hearing so that we have enough time to compile our opposing papers,” he told businessdaily then.

Although the RBZ says Trust had a core capital of $1,9 million — against a minimum threshold of $75 million — as at December 2013, it has been vigorously pursuing discussions with Errol Gregor’s MOGS and as part of a $1 billion investment deal in Zimbabwe.

While the latter has committed to inject nearly $25 million into the institution, the cash-rich Royal Bafokeng Holdings subsidiary is also angling to construct a fuel pipeline linking Harare, Mozambique and other southern African countries.

The investment has, however, been threatened following Trust’s placement under provisional liquidation by High Court judge Loice Matanda-Moyo placed in December 2013.

Although the DPC had been acting in line with the order for provisional wind up ahead of final liquidation, the net effect of the latest ruling and court-directed postponement is that Chikura’s institution should halt its call for claim submissions and the payment of deposits not exceeding the maximum insurable sum of $1,7 million.

Prior to the latest development and court ruling, the DPC boss had announced that as the duly appointed provisional liquidator, he was empowered to reimburse depositors who had been affected by the bank’s closure.

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