Ithala Bank yesterday brought an urgent application before KZN High Court (Pietermaritzburg) Judge Muzi Ncube in a bid to access frozen funds to pay staff salaries after the SARB’s Prudential Authority (PA) suspended all activities on the bank’s accounts in January.

The Mercury reports the PA has argued that Ithala was legally and technically insolvent while the bank has approached the High Court, in the interim, in an urgent bid to compel the repayment administrator, Johannes Kruger, to give it access to R863m in frozen funds to pay staff.

Kruger, in turn, is seeking to overturn a November 2024 court ruling which said he overstepped his powers when he sought to take control of all operations at the bank.

In November, Ncube ruled against Kruger’s application to stop operations which were not deposit-taking, however, the repayment administrator applied for leave to appeal the decision which paved the way for the halting of all operations, and this also prevented the bank’s debtors from making payments to the bank.

Yesterday, Ithala’s counsel, Advocate Sandile Khumalo SC, said despite leave to appeal being granted against the order by Ncube, the order must be effected.

Khumalo said this was necessary because by the time the SCA hears the matter, there would be significant harm done to the bank’s staff and depositors, who could not access their funds. Khumalo asked the court to allow the bank to access the R863m that was already in its account, adds the report in The Mercury.

‘Your lordship, all we are asking for is for the bank to be allowed access to operations that are non-deposit-taking. The staff has nothing to do with the non-compliance issues and they need their money to make ends meet,’ he said.

Khumalo asked the court to also determine whether social grant funds that were transferred to the bank by Sassa could be defined as deposits, arguing that the government cannot be defined as a depositor when it pays grant recipients through a bank.

He said Kruger’s argument that its duty is to protect the banks depositors’ money may lead to the bank collapsing because of its non-compliance with financial regulations.

In response to the bank’s application, Advocate Etienne Theron SC, acting for Kruger, said he is opposed to the application because the R863m was still the depositors’ money and it his duty and that of the PA to protect these funds.

According to The Mercury, Theron also dismissed the assertion that social grant funds could not be defined as deposits, saying once the money is transferred to a bank, it becomes an asset of the bank.

He said social grant funds emanate from taxpayers’ money and it is the PA’s responsibility to protect these.

‘It is important that it is treated as deposits because should anything happen to the bank, Sassa –which deposits the money – will be liable for it,’ he said.

The report notes judgment was reserved.

Full report in The Mercury