Trustco attacks BoN’s move against bank

The Bank of Namibia (BoN) acted illegally and irrationally when it decided to suspend the operations of Trustco Bank a week ago, the chief executive officer of the embattled bank’s holding company, Trustco Group Holdings, is claiming in a case filed at the Windhoek High Court this week.

With thousands of debit orders in the pipeline for collection through Trustco Bank from today to the end of August, the BoN’s decision to suspend the operations of the bank will have a profound cash flow impact on two other parts of the Trustco group, the companies Trustco Finance and Trustco Insurance, and on their clients, Trustco group chief executive officer Quinton van Rooyen says in an affidavit filed at the court.

Van Rooyen says Trustco Bank’s business is currently limited to holding funds of various companies in the Trustco group, processing debit orders for Trustco Finance and Trustco Insurance, and collecting debit orders on mortgage bonds extended to 18 clients of Trustco Bank.

This is after the BoN directed Trustco Bank in July last year to stop taking deposits and extending credit to clients of the bank.

Van Rooyen also informs the court in his affidavit that the debit orders processed by Trustco Bank pertain to premiums for life and legal insurance payable by about 27 840 Trustco clients, and monthly micro-loan payments of about 2 650 members of the public.

The central bank’s decision to suspend the operations of Trustco Bank on Friday last week (18 August) “significantly prejudices thousands of members of the public who hold insurance policies”, Van Rooyen says.

He adds that the suspension of the bank’s operations would also preclude Trustco Group Holdings from concluding a transaction through which Trustco Bank stands to gain access to a finance facility of N$1,25 billion that would enable it to extend credit to the public again, once it is allowed to do so.

“Should Trustco Bank’s business be suspended entirely, the transaction that seeks to secure [the bank’s] future will fail and members of the Namibian public will have their insurance summarily terminated,” he says as well.

Van Rooyen’s affidavit sets out the grounds on which Trustco Bank and Trustco Group Holdings want the High Court to issue an interdict stopping the implementation of the Bank of Namibia’s decision to suspend Trustco Bank’s operations.

Judge Boas Usiku postponed the hearing of the application filed by Trustco Bank and Trustco Group Holdings to Thursday next week at the end of an appearance by lawyers involved in the case before him yesterday.

The BoN has given notice that it is opposing the application.

While accusing the BoN of “illegal and irrational conduct”, Van Rooyen is also claiming in his affidavit that the central bank is trying to cause Trustco Bank and Trustco Group holdings “as much harm and prejudice as possible” and of trying to avoid having to go to court with an application for the winding-up of Trustco Bank and a review application that Trustco Bank filed against the BoN in September last year.

In its application to have Trustco Bank wound up, which was filed at the High Court in November last year, the BoN is alleging that Trustco Bank is insolvent, with its liabilities exceeding its assets, and that the bank is also unable to pay its debts.

In his affidavit filed on Monday, Van Rooyen maintains that Trustco Bank is solvent and that has complied with directives that the central bank has issued to it.