Special Hearings — Business Hearings — 1997-11-12

DR STALS: I would think if one goes back in the long history of the period covered in this submission it is a fair criticism.  Again within the environment in which the Reserve Bank operated, I think it is understandable, but there certainly has been major changes in the attitude, in the policy and the approach over the past five, six years and gratefully from our side also, with much more success.
 There was a time when many people from the Black community just did not want to work for a public sector institution, perceived to be part of the Government and the public sector system.
 So even if we did want to recruit at one stage, it was almost impossible to get people to come and work for the bank.  Now, we have made good progress in the bank over the past few years.  I think four years, five years ago the total staff at the bank we had about 16 percent from the disadvantaged communities.  We now have about 34 percent if I am correct.
 We have found it easy - fairly easy to make the necessary transformation at the top level of the bank and that is it the board level of the bank.  Composition of the board today, I think is such that we can say at least say we have good representation of all the population groups in South Africa at the board level of the bank.
 We have made very good progress at the junior level in the bank.  I must say that our attitude was also central banking is a very specialised function.  It is difficult to get people from outside the central bank and unfortunately there is only one central bank in every country;  to appoint people to senior positions that will have the necessary experiences behind them.
 We appointed a number - 120 if I have it correct, young Black people to the bank about three years ago, four years ago.  We put them through them through very special training courses.  We did a lot of work in the bank itself to establish a special Reserve Bank Training Institute which is so successful that we are now providing training to central banks from the Sadec countries, the other countries in Southern Africa.
 It was our experience that it takes about ten years for a junior appointee in the Reserve Bank to reach the level of management.  We decided that we will put these cadets, these young people that we appointed in the bank through special crash courses, enhanced management development programme to reach the management status level by - in about five years time.
 Many of those people left the bank again after the training we gave them. but I certainly believe that we are now beginning to reap the benefits of this programme and we are promoting quite a number of people from that position to the junior middle management level.
 At the level of senior management in the bank, yes, we admit, we have not been very successful.  We appointed a few people who left us again, regarded the Reserve Bank as a good place to get some more training experience and left us again and it is very difficult, but even we do our best.
 We have an enhancement, a special enhancement scheme for senior people to leave the bank at an early stage, provided they can be replaced by a transformation appointment.
 So, the goodwill is there, the intentions are there and we are gradually making progress and I think as with many things in the Reserve Bank, I know we are often accused of going - moving too slowly and I've got to be prepared to apply a big bang approach, but gradualism.
 Well, we have the same policy of gradualism in the transformation of the total staff of the bank and yes, we think we make good progress and we think we do it on a bases that maintains the standard - it's a high standard, it's a good quality, the professionalism of the central bank. 
 So, we are making progress.  The answer is yes.

DR BORAINE: Thank you, Dr Stals, for your frankness.  I want to thank you also in particular for the last paragraph of your submission and as it stands there I don't have to enlarge on it.
 The last question I have is;  there was a submission before the Commission which suggested that the Reserve Bank was more ready to assist as a life boat, assistance as it were, banks which were sort of establishment banks, to use a phrase.  
 The one referred to was Trust Bank and yet in their view, in their submission, so-called Black controlled banks who also got into difficulty were not given assistance.  They say that the assistance was given at one percent interest factor.  I'm not sure if this is factual or not, but I wonder if you care to comment on that?

DR STALS: Again the policy of lending of last resort or the function of lender of last resort, is a common function of central banks around the world.
 You can just look what is happening in East-Asia today with Thailand where the Government Central Bank took over 58 banks and financial institutions recently.  Indonesia where 18 banks were closed and the central bank took over responsibility for the repayment of the deposits.
 So that's just one point I must make is that there's nothing wrong with the central bank providing assistance to banking institutions.  As a matter of fact, the first transaction South African Reserve Bank did in 1921 was to provide a special loan to the National Bank of South Africa on the second day after we opened our offices.
 That loan at a later stage enabled Barclays Bank to take over the National Bank and today we have First National Bank, back to the name of the bank that the Reserve Bank assisted in 1921.
 But on the - over recent years, I think the assistance to Trust Bank and then Bank Corp and then ABSA was part of that whole process of transforming a bank that had serious problems.  From Trust Bank into Bank Corp and from Bank Corp into ABSA and the - with the advantage of hind sight it was a very successful operation and it ended up with a new big banking institution that is sound and well based today.
 Trust Bank had at the time 90 000 depositors with a total amount of 26 billion rand on deposit.  To have liquidated a bank a like that in any country, anywhere in the world, would have been - could have created a major disaster for the total banking sector.
 So, I don't think it is necessary to justify why the Reserve Bank and the Minister of Finance at that time decided that the special assistance should be given to this bank. 
 Now, again there - when we talk about other banks, Black controlled banks, the African Bank was established in 1975.  The Indian Bank, Republic Bank was established early 1980's, but before that also in the 1970's.  Islamic Banks were established.  Now, I think this is a Truth Commission and if you were to like to invite some of the senior officials, top management, chairman of board of directors of some of those banks I mentioned to you and ask them whether they ever received any assistance from the Reserve Bank, I am sure they will be able to tell you that relative to the size of the bank, they received much more assistance than Trust Bank ever received from the Reserve Bank.
 Some of those banks were carried for years by special assistance from the Reserve Bank, but I don't think so.  I think we're very objective in applying, making assistance available if necessary.  
 So, again, if there is anyone of these banks that feel that they were not well treated over those many years providing assistance, must point to you that even in my time I can remember four banks that were liquidated and not one of those that you mentioned were liquidated.
 They were assisted at many many times.  So I think it is a little bit unfair and as I say I can only tell the truth to the Truth Commission under oath and say to you, no, that we have never discriminated between any kind of bank or any banking institution when they really needed special assistance from the Central Bank.

DR BORAINE: Thank you very much.  I've got no further questions.

CHAIRPERSON: Mr Glamini?