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The African Bank crisis should make investors ask more pressing questions

[Johannesburg, 13 August 2014] - The current crisis enveloping African Bank brings to mind the 2002 banking crisis that crippled Saambou similarly hobbled by risky micro-lending practices. Despite African Bank performing well through previously trying periods, its performance more recently, notably following the resignation of founder and CEO Leon Kirkinis, has seen the flailing organisation placed under curatorship by the South African Reserve Bank.

The unsteady performance of any financial institution rightly places investors on high alert. They would be wise to question the security of funds placed in such institutions. Are their investments, deemed "guaranteed", indeed as safe as houses?

It is a fitting analogy, as unlike a secure investment, the term "guarantee" is a very loose one. Furthermore, investors rarely question the conditions of the guarantee. Generally speaking, the public confuses a guarantee with security. For example, does the guarantee maintain that an investor will get the full investment back, or that the investment will benefit from interest if it makes profit?
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The African Bank crisis should make investors ask more pressing questions

Last updated : 13 August 2014


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