In the past four years, 40 banks have disappeared from the list of licensed deposit-taking institutions. A good number of those were listed entities that either hit the wall or abandoned their banking licences as the fashion faded.
Shadowing the collapse of IT counters, what is now known as the speciality finance index has lost 71% since its 1998 peak.
That year marked the end of a bull-market proliferation of small banks. Investors felt the weight of collapses like Real Africa Durolink, The Business Bank, Regal Treasury and Saambou.
Not only did shareholders get burnt, but depositors dashed to safer big banks, though the only depositors to have lost money in the banking collapses were in Regal Treasury Bank. The problem was that sentiment towards small banks had been dashed. As a result, others called a halt to the small-banking experiment, including Corpcapital, Brait, AMB and Cadiz.
Brait CEO Antony Ball summed up the dilemma at the time: "A bank structure works only if you gear it and you extend the terms of your assets against liabilities." In other words, make long-term loans against short-term deposits.
The former banks are now captured in the JSE's speciality finance index, alongside licensed banks Abil and Investec and a host of smaller finance houses.
Brait and AMB are focusing on corporate advisory work and private equity. Corpcapital is selling investment banking assets and possibly heading towards a winding-up. Cadiz, the first to give up its banking licence, is refocused on its derivative structuring business.
