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Why CFX Bank collapsed: curator

Shakeman Mugari

THE curator of CFX Bank, Frank Kuipa, says his investigations have revealed that the bank collapsed last December because of “human interference” with the computer system


In his summary of findings, Kuipa said the bank’s computer system had been tampered with, leading to a system imbalance of $63 billion.

“This means that the financial statements that are automatically generated by the computer were not balancing because of improper human interference,” Kuipa said.

CFX Bank used a system called Equation, which Kuipa said was manipulated to give a false impression of the bank’s financial position. He said the investigations had revealed that human interference led to a serious mismatch between accounts generated by the system and those presented by management.

“There was an accumulated loss of $115 billion as at 31 October 2004. The bank’s liabilities exceeded the assets by $171 billion as at 31 December 2004.”

“Throughout the year, interest paid exceeded interest received. Hence net interest income was negative throughout the 2004 financial year,” said Kuipa in the report.

Although the inquiry is still going on, initial forensic investigations indicate that the bank collapsed because it was “never adequately capitalised and has always faced challenges related to its undercapitalisation”.

Kuipa said non-performing insider loans had also precipitated the collapse of the bank. Large sums were invested in assets that were either poor or had no returns, he said.

“Non-interest earning loans to the holding company – several loans were created at no interest to insider companies thereby prejudicing the bank.”

Kuipa said some loans were also advanced to directors and senior management from depositors’ funds at concessionary rates or some interest was illegally written off, defrauding the bank of billions of dollars.

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