Loans Or Donations

I read with concern, the article on banks in the “August 27 to September 2” edition of the Financial Mail titled “Team blue wins, for now”

Two aspects stand out for me and are seemingly overlooked or taken for granted concerning impairments for bad debts.

Firstly, the banks’ management of loans. 

Banks provide astronomical amounts of money to fund bad debts. Currently the Standard Bank R11.3bn and ABSA R14.7bn according to the abovementioned article. Put aside the risk and accountancy conservancy and all the other clichés which are used to justify this and consider what is actually happening. 

Surely, risk associated with loans should be individually considered much more diligently before loans are paid to lenders with appropriate safeguards such as collateral and security. Banks even categorise loans into three stages to help assess the adequacy of their impairment provisions. Interesting information, but it is actually too little too late. 

What seems to be taken for granted is the fact that banks have effectively evolved a scheme to donate money to errant lenders with shareholder’s funds and to replenish it with bank charges at their customers’ expense. Billions of Rands are “laundered” through this scheme – it is staggering! 

Secondly, defaulting on debt repayment seems to be quite common in South Africa by individuals who enjoy good lifestyles at the expense of others. 

The South African Revenue Service, service providers and of course banks are prime examples of their victims. 

When it comes to banks one cannot but wonder whether many so-called lenders accept loans from banks with no intention of repaying them at all. 

To some degree, banks must accept responsibility for this malaise as they continually aggressively advance money and subsequently write it off to keep their scheme revolving.  

Ian Juszkiewicz

Morningside

Sandton