01/02/2018 15:32 GMT | Updated 01/02/2018 15:32 GMT

Treasury Wants Viceroy Investigated In U.S. And U.K.

National Treasury has gone in to bat hard for Capitec, saying the Viceroy report is reckless.

Siphiwe Sibeko / Reuters

National Treasury has gone in hard to bat for Capitec Bank, which earlier this week was accused by the opaque entity Viceroy Research of questionable lending practices.

According to a statement, the treasury believes Viceroy acted "recklessly" when it released its "speculative" report on the bank – while admitting it had been short-selling the company and therefore stood to benefit from a falling share price.

Treasury has now asked the Financial Services Board (FSB), the statutory body that regulates the financial sector, to look at investigating Viceroy for market abuse. The FSB has also been requested to notify its counterparts in the U.S. and the U.K., the Securities and Exchange Commission and the Financial Conduct Authority respectively, about Viceroy's conduct.

They will have to "consider whether Viceroy is regulated appropriately and to consider whether it has transgressed any of their market conduct and market abuse laws that aim to protect investors".

The South African Reserve Bank (SARB) earlier said that it is satisfied that Capitec is adequately capitalised and that there are no overt reasons to launch an investigation into the bank.

Capitec CEO Gerrie Fourie told HuffPost earlier that he is concerned about insider trading. "When the report came out, our stocks dropped slightly before it was published. This shows that certain people may have known about it before. We cannot investigate this ourselves, so the FSB is now involved," Fourie said.

Treasury did not mince its words in slamming Viceroy. It referred to the shadowy group as "opaque" and said it operated anonymously until a few weeks ago. Viceroy was exposed by Moneyweb and the Australian Financial Review, who revealed the characters behind the firm. "The reckless way in which it released its report is clear proof it is not acting in the interest of financial stability in South Africa," Treasury said.

It added that regulators consider all relevant reports and acts when there are transgressions in law, but that there is no basis to put the bank under curatorship.

Viceroy raised red flags about Steinhoff last year, and their report precipitated the near collapse of the company.

"Treasury has been in constant contact with the registrar of banks since the report was released, and is satisfied with the assurance from the SARB that Capitec is well capitalised, liquid and solvent, and meets all prudential requirements. This means that the funds of depositors are safe," the statement said.

Viceroy raised red flags about Steinhoff last year, and their report precipitated the near collapse of the company.

Questions were, however, asked about the identities behind the organisation – and what their motives were. Capitec's share price dropped by as much as 20 percent when the report was released, but has since recovered.