KwaZulu-Natal MEC for finance and economic affairs Zweli Mkhize announced yesterday that his department had sought legal advice on whether to take action to recover funds from former employees of Ithala bank, including CEO Sipho Nyembezi.
Ithala made headlines when it was reported that Nyembezi received a package of R3,2 million a year.
Mkhize said the directors of Ithala who had approved excessive remuneration packages for its former CEO and other senior executives, have been asked to "step down".
According to Mkhize a probe by independent investigators found that the package was "unprocedural and noncompliant" and that the packages for other senior executives were also "excessive".
"The human resources committee responsible for salaries felt that increases were justified because they believed that Ithala should not fall too far behind other financial institutions in terms of paying their senior managers," Mkhize said.
"But we felt that the overall packages showed excessive increments, and was not the correct benchmark for a bank like Ithala."
Mkhize's office, which has executive control over Ithala's operations, was not consulted about the remuneration packages as required by law.
The probe followed queries from the province's legislature's finance committee and the standing committee on public accounts (Scopa).
Mkhize conceded that despite the executive problems at the institution, there were other challenges. These included the bank's dealing with small businesses and cooperatives.
"We are not going to abandon them but will look at possible ways of helping them," Mkhize said.
Newly elected Ithala CEO Ike Nxadlana said the bank was in a healthy financial state.
He was responding to fears that the institution might be bankrupt after paying such huge salaries to its executives.
"I went through the financial statements and the institution is making a profit," Nxadlana said. "Ithala is in no way going to collapse."
Ithala chairman Manana Nhlanhla said they had put together a turnaround strategy to make a financial organisation they can be proud of.