News Column

'Only money market clients were exposed to loss'

August 21, 2014



ABSA Bank says its savings accounts and deposits were not affected as the exposure to African Bank was held by the Absa Money Market Fund.

And an economist says that if the SA Reserve Bank had not stepped in, money market fund investors would have lost much more.

The bank was responding to a Cape Argus query following complaints from customers, mainly pensioners, who said their accounts had been |debited without notification last week.

One pensioner, who asked to be identified only as Susan, said she noticed that R7 600 had been deducted from her account only after reading reports in the newspapers.

"They (Absa) didn't notify me. They told me about African Bank being |placed under curatorship and that |they had to take out the money. Every time we make a deposit into the money market account we have to pay 0.4 percent."

Another pensioner, who also asked not to be identified or reveal how much she lost, said: "I am furious, I am absolutely livid. There was no warning about this. Absa said I won't get anything back." She said she had now learnt that people should not put all their eggs into one basket.

Absa spokesman Zobuzwe Ngobese said the bank understood that the pensioners invested in the fund, managed by Absa Asset Management, were upset about the adjustments.

"To clarify the situation it is important to highlight upfront that Absa Bank's savings accounts and deposits are not impacted, as the exposure to African Bank was held by the Absa Money Market Fund."

The fund, established in May 1997, had a low-risk profile. "The fund had circa 3 percent exposure to African Bank when the South African Reserve Bank placed African Bank under curatorship on Sunday, August 10.

"Late the afternoon of the following day the Financial Services Board issued an instruction to all money market funds with exposure to African Bank regarding how to process the South African Reserve Bank's decision that day."

Ngobese said this had an impact on at least seven of South Africa's money market funds with exposure to African Bank.

"This resulted in a capital adjustment of circa 0.3 percent in the Absa Money Market Fund. The exposure to African Bank was removed on Friday, August 15 to provide certainty and confidence to investors."

Following this decision, last Tuesday Absa Asset Management announced that ratings agency Fitch had upgraded its money market fund by four notches from A to AA+ .

Efficient Group's chief economist Dawie Roodt said investors would have lost up to 10 percent had the Reserve Bank not taken action.

joseph.booysen@inl.co.za

Cape Argus


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Source: Cape Argus (South Africa)


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