The Public Servants Association (PSA) has called on the KwaZulu-Natal government to take immediate legal action to oppose the South African Reserve Bank’s (SARB) “reckless application” for the liquidation of Ithala Bank.

The PSA says the move by the SARB’s Prudential Authority to liquidate Ithala is a direct attack on the financial stability of the province, the livelihoods of more than 257,000 depositors and the broader developmental agenda of the province.

“As the primary shareholder, the KwaZulu-Natal government has a fiduciary duty to protect Ithala Bank and ensure that it remains a viable financial institution. Failure to intervene would amount to gross negligence, effectively allowing SARB to dismantle one of the few remaining state-owned financial institutions committed to economic transformation and financial inclusion,” reads the PSA statement.

The PSA called on KwaZulu-Natal premier Thali Ntuli and the finance MEC Rev Musa Zondi to immediately file a legal challenge against the SARB’s liquidation application before the Pietermaritzburg high court. 

“A legally binding financial guarantee should be provided to prevent the destruction of Ithala Bank. In addition, National Treasury should be engaged to secure a sustainable rescue plan that protects depositors and employees,” said the union.

The PSA condemned the SARB’s decision, which it said disregarded Ithala Bank’s historical significance and its critical role in economic empowerment. '

The union said “the so-called prudential regulation” cannot be used as a weapon to destroy state-backed financial institutions that serve marginalised and working-class communities.

It said instead of working towards solutions, the SARB has rushed to liquidation without considering viable alternatives such as business rescue, recapitalisation or structured intervention.

“This reckless action is nothing short of economic sabotage against KwaZulu-Natal’s financial independence. The PSA stands firm in its commitment to defend Ithala Bank’s depositors and employees.

“We will not allow the SARB to bulldoze through a liquidation process that will cripple the financial security of thousands of people. We demand that the KwaZulu-Natal government immediately joins legal proceedings to protect Ithala Bank, or risk being complicit in its downfall,” the union said.

Thousands of Ithala clients have been left high and dry after the Prudential Authority applied for the liquidation of the bank.

Clients cannot access their money after their accounts were frozen.