B of A Bans New Loans to South African Borrowers

Bank of America, the nation’s second-largest bank, has formally banned any new loans to South African borrowers because of apartheid, that nation’s policy of enforced segregation.

“We believe that prosperity and stability cannot return to South Africa while the apartheid system remains,” the bank’s management wrote in a statement in its June 10 employee newsletter.

“Taking into account not only the credit risk apparent in South Africa but also our abhorrence of apartheid, we will not make new loans to borrowers in South Africa as long as the apartheid system exists,” the statement said.

The ban is somewhat of a policy reversal for the bank’s management, which just two months ago opposed a shareholder resolution calling for the San Francisco-based bank to end its dealings with South Africa. That resolution, introduced by four religious organizations, was defeated by stockholders. Shareholders have voted down resolutions to impose a moratorium on new lending to South Africa five times in the past eight years.

The bank has expressed opposition to apartheid since 1978 but never formally severed any financial ties until now. The bank’s management had maintained the position that it wanted to keep its options open so new loans could be made “when conditions improve to our satisfaction.”

Bank of America hasn’t made any direct loans to the South African government since 1980 and stopped lending money to government-related entities in 1983. The bank hadn’t made any new loans to companies based in South Africa since last July.

“People for a long time have advocated that we get out of South Africa, and this basically acknowledges that we’ve done that,” bank spokesman Peter Magnani said of the new policy.