| Financial System
Regulation, Legislation and Reform
Financial legislation, regulations
and rules. Financial regulation of the
financial system in South Africa - bank
supervision and the regulation of financial markets, insurers,
investment firms, asset managers, financial conglomerates, and
money-lenders (microfinance). Reform and development of the
financial system. The legal and regulatory framework; and regulatory
regime. The role of corporate governance. Financial stability and
systemic risk. The Financial Intelligence Centre and money laundering. |
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Topical:
Overview
of the main regulatory regimes after the 2008/2009 financial crisis
This interactive graphic provides an overview of the
financial regulation framework, both present and proposed, in the
United Kingdom (UK); the European Union (EU); and the United States of
America (US).
IMF: SA regulators shielded the banking sector
from the financial crisis
SA’s tight banking regulations have drawn praise for
shielding the sector from the worst of the financial crisis that
claimed iconic institutions such as Lehman Brothers two years ago. In
a joint report issued yesterday, the International Monetary Fund (IMF)
and World Bank said local banks and insurance firms had remained
profitable during the crisis, while their capital adequacy ratios had
remained above the regulatory minimum. The report states: 1. Banking
supervision in South Africa has been effective and has contributed to
reducing the impact on the financial sector of the global financial
crisis. Throughout the crisis, the banks have remained profitable and
capital adequacy ratios have been maintained well above the regulatory
minimum. The registrar’s direct access to the board and the audit
committee, combined with the sound governance requirements for banks,
have been effective in raising board awareness of regulatory and
supervisory matters and ensuring strong risk management in South
African banks. 2. The Bank Supervision Department (BSD) of the South
African Reserve Bank (SARB) is to be commended for its early adoption
and full implementation of the Basel II framework in an emerging
market environment on 1 January 2008, and its continuous efforts to
remain in line with subsequent international developments. The
systemic risk-add on and the implementation of idiosyncratic capital
buffers have contributed to the strength and stability of the South
African banking system. The overall implementation of the Basel II
advanced approaches has been rigorous and comprehensive. ... [IMF]
1208
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The new Financial Sector Forum Website
The new Financial Sector Forum at http://www.financialsectorforum.com will, in time, consolidate two existing websites: The existing Financial Sector Forum at http://www.finforum.co.za (here) and South Africa: Financial Institutional Structure at http://reservebanksa.blogspot.com. This action was necessitated by a lack of funding.
Recent posts on the new Financial Sector Forum website include:
This site also links to sister website, The Financial Regulation Forum at http://www.financialregulationforum.com
The Financial Regulation Forum Website
Recent posts on the new Financial Regulation Forum website include:
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Understanding
South African Financial Markets, van Zyl, Botha & Skerritt
2nd edition, 2006
The SA
Government, Polity and actsonline
provide a
legislation retrieval service
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May
2007 |
SA Financial Sector Forum - An Overview of the SA Regulatory Framework and
Legislation |
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An overview of the structure, legislation
and organisations which regulate and supervise the
financial sector in South Africa. Links are provided to the involved organisations and
to legislation, where available. |
December
2010 |
Bank of England - Financial Stability Report |
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The Bank of England published its bi-annual
Financial Stability Report (a visual Summary
of the report is available). The Report is part of the delivery of the
Bank's strategy for its financial stability work, as set out in the
Bank's Annual Report 2010. The Report concentrates on the Bank's
assessment of conjunctural risks to financial stability. In relation
to current conditions, the Report notes that since June sovereign and
banking system concerns have re-emerged in parts of Europe. The IMF
and European authorities proposed a substantial package of support for
Ireland. But market concerns spilled over to several other European
countries. At the time of writing, contagion to the largest European
banking systems has been limited. In this environment, it is important
that resilience among UK banks has improved over the past year,
including progress on refinancing debt and on raising capital buffers.
But the United Kingdom is only partially insulated given the
interconnectedness of European financial systems and the importance of
their stability to global capital markets. The Report also says that
more medium-term risks are posed by a redistribution of capital within
the financial system. Capital has flowed into safe assets and, despite
recent increases, bond yields remain low in many advanced economies.
There are some signs of this intensifying a search for yield,
including into emerging market assets. Low yields may also be masking
latent distress among some overextended borrowers, including some
households, corporates and sovereigns. Against that backdrop, it is in
banks’ collective interest to build resilience gradually through
retention of earnings, which would be boosted if banks restrain
distribution of profits to equity holders and staff. On the policy
front, the Report notes that the FSB/G20 reform programme includes
improvements in the loss-absorbency of systemically important
financial institutions and in the regimes through which they could be
resolved; strengthening of central counterparties’ (CCP) risk
management; and improvements in the capital regime for banks’
trading books. Reform in those areas will engender incentives for
activity to migrate to unregulated parts of the financial system, so
it is important that policymakers exercise vigilance about the
regulatory perimeter. ... more |
December
2010 |
IMF - South
Africa: Detailed Assessment of Compliance on Basel Core Principles for
Effective Banking Supervision |
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The report
states: 1. Banking supervision in South Africa has been effective and
has contributed to reducing the impact on the financial sector of the
global financial crisis. Throughout the crisis, the banks have
remained profitable and capital adequacy ratios have been maintained
well above the regulatory minimum. The registrar’s direct access to
the board and the audit committee, combined with the sound governance
requirements for banks, have been effective in raising board awareness
of regulatory and supervisory matters and ensuring strong risk
management in South African banks. 2. The Bank Supervision Department
(BSD) of the South African Reserve Bank (SARB) is to be commended for
its early adoption and full implementation of the Basel II framework
in an emerging market environment on 1 January 2008, and its
continuous efforts to remain in line with subsequent international
developments. The systemic risk-add on and the implementation of
idiosyncratic capital buffers have contributed to the strength and
stability of the South African banking system. The overall
implementation of the Basel II advanced approaches has been rigorous
and comprehensive. ... more
Other South
African Country Reports are:
 | South Africa: Report on the Observance of
Standards and Codes on Banking Supervision, Insurance Supervision,
and Securities' Regulation |
| South Africa: Detailed Assessment of Observance
on the International Association of Insurance Supervisors'
Insurance Core Principles |
| South Africa: Detailed Assessment of
Implementation on IOSCO Principles-Securities Markets |
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October
2010 |
SA Reserve Bank - Financial Stability Review: September 2010 |
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... The global
financial crisis has affected the financial systems of countries in
different ways. In addition to international efforts to strengthen the
overall robustness of the regulatory environment, some countries have
responded by reforming national regulatory systems. Some common themes
that have emerged from countries that have already announced
regulatory reforms include the extension of central banks’ powers
related to supervision, market conduct and consumer protection; the
provision of more appropriate structures and policy instruments to
assess and mitigate “systemic risks”; the need to address the “too-big-to-fail”
moral hazard problems associated with systemically important financial
institutions (SIFIs); and the need to close the regulatory gaps that
were prevalent in the build-up to the financial crisis. Many other
issues remain to be addressed, and although some countries are
proceeding with changes, it is thought that a degree of international
convergence around a common international framework is needed. Some of
the proposed reforms will only be fully operational over the next few
years, and therefore the implications of these developments for
regulation and supervision will only become more apparent some time in
the future. ... more |
July
2010 |
SA Reserve Bank - Financial
Surveillance Department (Exchange Control) |
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The
name of the Exchange Control Department will be changed to the
Financial Surveillance Department with effect from 2010-08-02. The
Minister of Finance has delegated to the Governor and/or a Deputy
Governor as well as to the General Manager of the Financial
Surveillance Department (and to other officials in the department),
all the powers, functions and duties assigned to and imposed on the
Treasury under the Exchange Control Regulations (with certain
exceptions). The Financial Surveillance Department is, therefore,
responsible for the day-to-day administration of exchange controls.
The Minister of Finance has also appointed certain banks to act as
Authorised Dealers in foreign exchange. This appointment gives these
banks the right to buy and sell foreign exchange, subject to
conditions and within limits prescribed by the Financial Surveillance
Department. Authorised Dealers are not agents for the Financial
Surveillance Department but act on behalf of their customers. Policy
is determined by the Minister of Finance (or even government/cabinet
in the broader sense). The South African Reserve Bank, therefore,
merely acts as an adviser to the Minister of Finance. |
May
2010 |
SA Reserve Bank - Bank Supervision, 2009 Annual Report |
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The
year under review again brought with it a challenging operating
environment for the banking sector, characterised by a cyclical
downturn in domestic economic conditions which were worsened by the
aftermath of the international financial market crisis. However,
notwithstanding these difficult circumstances, the banking system
remained stable and profitable, and capital levels were adequate
throughout 2009. From an international regulatory and supervisory
perspective, standard-setting bodies, such as the Financial Stability
Board (FSB) and the Basel Committee on Banking Supervision (the Basel
Committee), continued their respective processes of developing and
issuing guidance and standards to strengthen the resilience of the
financial sector in general and the banking sector in particular. The
Bank Supervision Department (the Department) as always closely
monitored and considered developments on the international regulatory
and supervisory fronts in an ongoing effort to promote the soundness
of the domestic banking sector through the effective and efficient
application of international regulatory and supervisory standards. ...
more |
April
2010 |
IMF - Global
Financial Stability Report |
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Risks to global
financial stability have eased as the economic recovery has gained
steam. But policies are needed to reduce sovereign vulnerabilities,
ensure a smooth deleveraging process, and complete the regulatory
agenda. The report examines systemic risk and the redesign of
financial regulation; the role of central counterparties in making
over-the-counter derivatives safer; and the effects of the expansion
of global liquidity on receiving economies. ... more |
April
2009 |
Financial
Stability Board - Financial
Stability Board |
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The
Financial Stability Forum was convened in April 1999 to promote
international financial stability through information exchange and
international co-operation in financial supervision and surveillance.
At the G20 Summit, April 2009, The Financial Stability Forum was
re-established as the Financial Stability Board.
On 2 April 2009, the Financial Stability Forum issued reports
covering: Recommendations for Addressing Procyclicality in the
Financial System; Principles for Sound Compensation Practices; and
Principles for Cross-border Cooperation on Crisis Management. |
August
2008
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Financial Services Board - 2008 Annual Report 
(PDF) |
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The
year under review has been a challenging and exciting year for the FSB.
We have seen a significant increase in the scope of work and have
increased capacity to improve efficiency and to cope with new
responsibilities and organisational changes to ensure that we are well
positioned to meet new challenges. The Financial Advisory and
Intermediary Services division (FAIS) has caught up with the backlog
of registrations of Financial Services Providers and the emphasis has
now turned to ongoing supervision. More than 14 500 entities have been
licensed in terms of the FAIS legislation and we have increased our
staff complement to cope with supervisory requirements. It is
encouraging to note that an increased degree of professionalism is
being recognised in the conduct of financial services
intermediaries.
In 2008 and beyond, the environment can be expected to be even more
challenging as growth in the economy slows and as inflationary
pressures intensify. Increased volatility in the markets will continue
to be a feature. The challenge for macroeconomic policy will be to
sustain steady growth while reigning in inflation. ... more |
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National
Treasury - Co-operative
Banks Development Agency |
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The Co-operative Banks Act, No 40 of
2007 (the Act) defines a co-operative bank as a co-operative
registered as a co-operative bank in terms of the Act whose members
– 1. are of similar occupation or profession or who are employed by
a common employer or who are employed within the same business
district; or 2. have common membership in an association or
organisation, including a business, religious, social, co-operative,
labour or educational group; or 3. reside within the same defined
community or geographical area. The Act seeks to create a development
strategy and a regulatory environment for deposit taking financial
co-operative institutions. The supervisor within the Co-operative
Banks Development Agency has the authority to exercise the powers and
perform the functions conferred on the supervisor by or in terms of
the Act in respect of primary co-operative banks that hold deposits of
less than R20 million and more than R1 million and has 200 or more
members. |
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July |
Ernst
& Young - Basel
II: The Business Impact |
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Financial
services institutions worldwide are recognising and embracing a new
era of banking, instigated by Basel II, according to the survey
processes and systems will significantly change, along with the way
risks are managed, signifying a new era and fresh dynamic in the
global financial services market place. |
June
2006 |
Bank
for International Settlements - International
Convergence of Capital Measurement and Capital Standards: A Revised
Framework |
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This
document is a compilation of the June 2004 Basel II Framework, the
elements of the 1988 Accord that were not revised during the Basel II
process, the 1996 Amendment to the Capital Accord to Incorporate
Market Risks, and the November 2005 paper on Basel II: International
Convergence of Capital Measurement and Capital Standards: A Revised
Framework. No new elements have been introduced in this compilation. |
August
2008 |
Joint
Forum - High-level
principles for business continuity |
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Financial
authorities and financial industry participants have a shared interest
in promoting the resilience of the financial system to major
operational disruptions. This interest is the result of multiple
factors.
The Joint Forum was established in 1996 under the aegis of the Basel
Committee on Banking Supervision (BCBS), the International
Organization of Securities Commissions (IOSCO) and the International
Association of Insurance Supervisors (IAIS) to deal with issues common
to the banking, securities and insurance sectors, including the
regulation of financial conglomerates. |
November
2000 |
BIS
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Organisational Structure of Banking Supervision
(PDF) |
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Traditionally, bank supervision was under the umbrella of central
banks, recently, many countries around the world have been moving bank
supervision outside their central banks. The advantages and
disadvantages of this policy, as well as from the point of view of
emerging-market countries, are discussed by Goodhart. |
November
2001 |
The Policy Board for Financial Services
and Regulation
- SMEs'
Access to Finance
in South Africa: A Supply-side Regulatory Review |
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The
small and medium-enterprises sector (SME) includes a wide range of
enterprises. The report covers the following areas: (i) the profile of
South African SMEs and their contribution to the South African
economy; (ii) access of SMEs to equity capital and debt; and (iii)
access to other bank services. In this context the report considers
the role of banks, the role of non-bank financial institutions (NBFIs,
including the establishment of core banks or narrow banks), the
role of the securities markets and the competitive environment within
which these different institutions function.
Related entry: Filling the Gap in South Africa’s Small and
Micro Credit Market: An Analysis of Major Policy, Legal, and
Regulatory Issues, indexed in the Financial
markets section. |
March
2005 |
Ernst & Young
- Excellence
in Corporate Reporting Survey 2005 |
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The
annual survey, which enters its eighth year, has grown to become the
benchmark for corporate reporting in South Africa. The survey covers
the top 100 listed companies on the JSE Securities Exchange. The
survey ranks companies in four different categories, namely Excellent,
Good, Adequate and Perfunctory. The Excellent category includes the
top ten companies that are ranked, while Perfunctory implies those
companies that perform only the bare minimum expected of listed
companies.
Surveys from previous years are available |
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October
2006 |
JSE Limited - Insider
Trading |
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The
purpose of this booklet is to bring together the various Acts and
requirements, as well as relevant corporate governance guidelines,
which all have a bearing on preventing market abuse. This booklet has
drawn on the Securities Services Act, 2004, section 3 of the JSE
Listings Requirements, and extracts from the SRP Merger and Takeover
Code to provide an outline of the legal framework. |
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March
2002 |
The Institute of Directors in Southern Africa
- The King Report on Corporate Governance
for South Africa - 2002 |
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The
King Committee on Corporate Governance is
available in printed format from the Institute of Directors.
Cliffe Dekker provides a PDF of the Report.
The Report finally provides corporate SA with a
world-class code of conduct. The extent to which business gives effect
to this code will be crucial to establishing a healthy and vigorous
business climate for the future. The report is not a prescriptive
document and expands on the first report on corporate governance in
1994. Key improvements include recommendations relating to the
composition of the board, specifically separating the roles of
chairman and CEO. There is a greater emphasis on the role of
independent non-executive directors, that is, directors with
absolutely no connection to the business. There is also a suggestion
of a nomination committee, in addition to the audit and remuneration
committees, which would oversee the appointment of new members to the
board. Particular attention is paid to the non-financial aspects of
corporate governance, including safety, ethics, the environment and
social issues such as HIV/Aids. |
May
2003 |
The South African Reserve Bank - The Myburgh Report on the Standard of
Corporate Governance in the Five Largest Banks |
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The
purpose of the review was to investigate compliance with corporate
governance best practices as laid down, for example, in the Banks Act,
the Regulations Relating to Banks and the recommendations of the King
Committee on Corporate Governance of March 2002.
The following findings are made in general terms: the banks are
committed to the adherence to and application of high standards of
corporate governance; acting on the advice of specialists in corporate
governance, the banks on their own initiative from time to time review
their corporate governance to ensure compliance with accepted
corporate governance principles; no serious breaches of corporate
governance were found to exist; the corporate governance of the banks
is sound; vigilance is nevertheless required to ensure continued
compliance with the standards governance which are constantly evolving
in South Africa and internationally. |
July
2003 |
The
Financial
Intelligence Centre and money
laundering |
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Money
laundering is performed to thwart the enforcement of criminal law by
creating a justification for controlling or possessing money or
property derived from any form of criminal activity. Money
laundering is discussed in the Institute for Securities Studies
Monograph: Clean
Money, Suspect Source, Turning Organised Crime Against Itself.
Money-laundering offences are contained in the Prevention
of Organised Crime Act, No. 121 of 1998 (PDF, 740
KB).
South Africa’s legal response to money-laundering is not yet
complete. A system of administrative measures to control
money-laundering and to facilitate its prevention, detection,
investigation and prosecution is being established through the Financial
Intelligence Centre Act, No. 38 of 2001 (PDF, 1800 KB). The Act seeks to combat
money-laundering activities through a Financial Intelligence
Centre (FIC) and a Money Laundering Advisory
Council (PDF).
The FIC has been established by National Treasury - see About
the FIC.
Procedures have been implemented in July 2003 - see draft Regulations
under the Financial Intelligence Centre Act (PDF). |
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December
1999 |
HB
Falkena & DT Llewellyn - The Economics of Banking:
A Target-Instrument Approach with Special Reference to South Africa |
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A
publication to assist bank executives and others in the formulation of
strategy in the rapidly changing banking environment. Trends in, and
pressures facing the banking industry are discussed.
In South Africa the regulatory authorities have three ultimate
objectives, namely (i) to ensure a safe and sound financial system;
(ii) to enhance the confidence of and fairness to investors; and (iii)
to ensure an efficient and effective financial system. The ultimate
objectives of the regulatory authorities must also be those of the
financial services industry.
The book can be downloaded in PDF format. |
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CISA
- The
Compliance Institute of South Africa |
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The
Compliance Institute of South Africa objectives are to encourage and
promote compliance within the regulatory environment of the South
African Financial Services industry.
The current emphasis of CISA is the development of an industry
compliance manual, referred to as the "CISA Members'
Handbook". Other priorities include compliance officer
accreditation programmes and the promotion of the professional status
of members. |
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July
2006 |
National
Credit Regulator - NCR |
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The
National Credit Regulator (NCR) was established as the regulator under
the National Credit Act 34 of 2005 (the Act) and is responsible for
the regulation of the South African credit industry. It is tasked with
carrying out education, research, policy development, registration of
industry participants, investigation of complaints, and ensuring
enforcement of the Act. The NCR is also tasked with the registration of
credit providers, credit bureaux and debt counsellors; and enforcement
of compliance with the Act.
The Micro Finance Regulatory Council (MFRC) has now been incorporated.
A report has been commissioned by the NCR, Credit
Extension to Households, December 2006 |
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MFRC - The
Micro Finance Regulatory Council |
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Now
incorporated into the National Credit Regulator (see above).
The primary aim
of the Micro Finance Regulatory Council (MFRC) has been identified as
the promotion of the money-lending industry so as to allow for
sustainable growth in the industry and to serve legitimate unserviced
credit needs. The MFRC has been established in accordance with
the Usury Act Exemption Notice of 1 June 1999 and has been recognised
as the official and single regulator of all money lending transactions
falling within the scope of the Usury Act Exemption Notice. Any money
lender who wishes to avail themselves of the benefits of the Usury Act
Exemption, will be required to register with the MFRC and thereafter
comply with the rules of the MFRC and the Exemption Notice.
Related entry: Filling the Gap in South Africa’s Small and
Micro Credit Market: An Analysis of Major Policy, Legal, and
Regulatory Issues, indexed in the Financial
markets section. |
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May
2003 |
The
Banking Sector Education and Training Authority
- BANKSETA |
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BANKSETA
supports and grows the level of current and future skills needed in
the banking sector. BANKSETA, does this by making Sector Grants
available for projects that contribute directly to the development of
priority skills.
A regulatory function of BANKSETA is to ensure the quality of
education and training in and for the workforce; and to provide and
regulate employment services. |
April
2003
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Cliffe
Dekker - South African Banking Regulation |
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The South
African banking system is well developed and effectively
regulated. This Website provides information on the legal
and formal requirements to be met before a bank may
accept deposits, conduct the commercial activities of
banking and the registration requirements for foreign
banks doing business in South Africa (through inter alia the
Banks Act and the Mutual Banks Act). Liquidation procedures pertaining
to banks, investment prudence,
taxation of banks and various statutory arrangements
affecting business in general and banks in particular are
discussed.
For an overview of the
Bank Supervision Department of the SA Reserve Bank, see SA Reserve Bank
Fact
Sheet no. 10. |
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SA
Reserve Bank - Exchange Control Manual |
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For
an overview of exchange rates and exchange control see SA Reserve Bank
Fact
Sheet no. 4.
This manual
is issued to assist Authorised Dealers in Foreign
Exchange, their customers and other interested parties by
providing a general understanding of the purpose, scope
and operation of the exchange control system in the
Republic of South Africa and in the Common Monetary
Area. |
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SA
Reserve Bank - Exchange Control Regulations |
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For
an overview of exchange rates and exchange control see SA Reserve Bank
Fact
Sheet no. 4.
The
regulations are promulgated by Government Notice R1111 of
1 December 1961 and amended up to Government Notice No.
R.1022 in Government Gazette No. 18170 of 1 August
1997. The State President has, in terms of section nine
of the Currency and Exchanges Act, 1933 (Act No. 9 of
1933), made Exchange Control Regulations as contained in
the Schedule in this Notice. |
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