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An
Overview of the South African Regulatory Framework and Legislation
by
the SA Financial Sector Forum
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Topical |
Banking and Credit |
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Recent proposed
changes to legislation include:
FinMark
Trust held a Tiered Banking workshop (incorporating
"dedicated banks") on November 2004, the Proceedings
have been published. |
|
NB Although
these
bills appear to be on hold, they are scheduled to be presented to
Parliament early in 2007 |
Classification
For the purposes of regulation,
financial services can be classified functionally into four categories, namely:
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Banking and credit services; |
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Insurance and related services; |
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Investment services; and |
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Criminal activities
(detection and prevention of). |
However, it should be noted
that significant institutional change has occurred over the past fifteen
years or so,
with the blurring of boundaries between institutions and financial
products, and because of financial institutions merging or reorganising into more
complex financial conglomerates.
Banking and credit services
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Banks and mutual banks
(deposit-taking institutions) |
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Microfinance institutions:
credit unions; village banks; stokvels; banks (microfinance activities) |
Insurance and related services
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Long-term insurers |
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Short-term insurers |
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Pension, retirement and provident funds |
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Friendly societies |
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Medical insurance |
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Road accidents |
Investment services
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Wholesale services: Financial exchanges,
securities firms, portfolio managers and collective
investment schemes |
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Retail services: Investment advisers and
marketers of financial products |
With regard to the regulation of investment
services, a distinction is made between securities related
investment services and non-securities related investment
services.
Detection and
prevention of unlawful activities
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Market abuse (e.g. insider trading) |
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Money laundering |
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Terrorism |
Financial
regulatory structure
Financial regulation in South
Africa is currently performed by several agencies. The financial regulatory
structure for the regulation of the financial system, financial intermediaries
and advisers is shown in the diagram.
Legislation
for Financial Regulation and Supervision
Financial regulation legislation in South Africa
is increasingly following international best practice through the accords of
international bodies such as the Bank
of International Settlements (BIS); the International
Organization of Securities Commissions (IOSCO); and the International
Association of Insurance Supervisors (IAIS).
The SA
Government, Polity
and actsonline
provide a legislation retrieval service.
NB The government has provided legislation online since 1993.
All documents linked to are
Acrobat PDF format unless otherwise specified.
Banking and credit services
Acts
| Banks
Act, [No. 94 of 1990] as amended
(Including all amendments up to and including, the Banks Amendment Act,
[No. 19 of 2003])
- under review, mainly to address the prescriptions of
the Basel II
accord see Proposed
Amended Legislation (.html).
Banks
Amendment Act, [No. 26 of 1994]
Banks
Amendment Act, [No. 55 of 1996]
Banks
Amendment Act, [No. 36 of 2000]
Banks Amendment Act, [No. 19 of 2003]
Regulations
|
| Mutual
Bank Act, [No. 124 of 1993]
Mutual
Banks Amendment Act, [No. 25 of 1994]
Mutual
Banks Amendment Act, [No. 54 of 1999] |
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Home
Loan and Mortgage Disclosure Act,
[No. 63 of 2000] |
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Bills
of Exchange Amendment Act, [No. 56 of 2000] |
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Currency and Exchanges Act
Currency
and Exchanges Amendment Act ,[No. 23 of 1996] |
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National Payment System Act,
[No. 78 of 1998]
National
Payment System Amendment Act,
[No. 22 of 2004] |
| National
Credit Act,
[No. 34 of 2005]
To promote a fair and non-discriminatory marketplace
for access to consumer credit and for that purpose to provide for the
general regulation of consumer credit and improved standards of consumer
information; to promote black economic empowerment and ownership within the
consumer credit industry; to prohibit certain unfair credit and
credit-marketing practices; to promote responsible credit granting and use
and for that purpose to prohibit reckless credit granting; to provide for
debt re-organisation in cases of over-indebtedness; to regulate credit
information; to provide for registration of credit bureaux, credit providers
and debt counselling services; to establish national norms and standards
relating to consumer credit; to promote a consistent enforcement framework
relating to consumer credit; to establish the National Credit Regulator and
the National Consumer Tribunal; to repeal the Usury Act, 1968, and the
Credit Agreements Act, 1980; and to provide for related incidental matters.
Usury Act, [No. 73 of
1968] - repealed
Credit Agreements Act,
[No. 75 of 1980] - repealed
Integration of Usury Laws Act,
[No. 57 of 1996] - repealed
Regulations
|
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Code
of Conduct on Credit Extension,
March 2007, The
Banking Association South Africa |
Financial
institutions
Insurance and related services
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Insurance Act,
[No. 55 of 1989]
Insurance
Amendment Act, [No. 54 of 1996]
Insurance
Amendment Act [No. 31 of 1997]
Insurance
Amendment Act, [No. 49 of 1998]
Insurance
Second Amendment Act; [No. 51 of 1998]
Insurance
Amendment Act, [No. 17 of 2003] |
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Long-term
Insurance Act, [No.
52 of 1998] |
| Short-term
Insurance Act, [No. 53 of 1998] |
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Pension
Funds Act, [No. 24 of 1956] (format html) - under review - see Draft
Pension Funds Amendment Bill (.html).
Pension
Funds Amendment Act, [No. 22 of 1996]
Pension
Funds Amendment Act, [No. 94 of 1997]
Pension
Funds Amendment Act, [No. 65 of 2001]
Pension
Funds Second Amendment Act, [No. 39 of 2001] |
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Closed
Pension Fund Amendment Act,
[No. 41 of 1999] |
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Friendly Societies Act, 1956
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Medical
Schemes Act,
[No. 131 of 1998]
Medical
Schemes Amendment Act, [No. 55 of 2001]
Medical
Schemes Amendment Act, [No. 62 of 2002] |
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Financial
Supervision of the Road Accident Fund Act, [No. 8 of 1993] |
Investment services
Wholesale services
| Securities
Services Act; [No 36 of 2004]
To consolidate and amend the
laws relating to the regulation and control of exchanges and securities
trading, the regulation and control of central securities depositories and
the custody and administration of securities, and the prohibition of insider
trading; to provide for the licensing of a clearing house and the approval
of nominees; to provide for a code of conduct for authorised users; and to
provide for matters connected therewith.
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Financial Markets Control Act,
[No.
55 of 1989] - repealed
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Stock Exchanges Control
Act,
[No.
50 of 1986] - repealed
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Safe Deposit of Securities Act,
[No. 85 of 1992] - repealed
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Custody and Administration of Securities
Act,
[No. 85 of 1992] - repealed
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| Public
Investment Corporation Act, [No. 23 of 2004] |
Retail services
Detection and
prevention of unlawful activities
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Securities
Services Act; [No 36 of 2004]
To consolidate and amend the
laws relating to the regulation and control of exchanges and securities
trading, the regulation and control of central securities depositories and
the custody and administration of securities, and the prohibition of insider
trading; to provide for the licensing of a clearing house and the approval
of nominees; to provide for a code of conduct for authorised users; and to
provide for matters connected therewith.
|
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Financial
Intelligence Centre Act, [No. 38 of 2001]
To establish a Financial Intelligence Centre
and a Money Laundering Advisory Council in order to combat money laundering
activities; to impose certain duties on institutions and other persons who
might be used for money laundering purposes; to amend the Prevention of
Organised Crime Act, 1998, and the Promotion of Access to Information Act,
2000; and to provide for matters connected therewith |
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Prevention
of Organised Crime Act, [No. 121 of 1998]
Prevention
of Organised Crime Amendment Act, [No. 24 of 1999] |
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Prevention
and Combating of Corrupt Activities Act, [No. 12 of 2004] |
Related
legislation
Authorities
Responsible for Financial Regulation and Supervision
Financial Sector Regulatory
Organisations
South African Reserve Bank
Established and operates in terms
of the South African Reserve Bank Act, 1989.
Bank Supervision Department (Registrar)
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Regulation and supervision of banking
services
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Financial Stability Department and Committee
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Stability of the financial system as a whole
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Management of systemic risk.
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National Payments System Department
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Oversight of the payments, clearing and settlement systems
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Legislation:
Financial Services Board
(Registrars)
The Financial Services Board (FSB), established as a statutory
body by the Financial Services Board Act, 97 of 1990, is financed by the
financial services industry itself, with no contribution from government. It
supervises the control over the activities of non-banking financial services, and
acts in an advisory capacity to the Minister of Finance.
The FSB supervises such institutions and services in terms of various Parliamentary
Acts which entrust regulatory functions to the Registrars of Long-and
Short-term Insurance, Friendly Societies, Pension Funds, Collective Investment
Schemes, Securities Services. Those functions resort in the office of
the Executive Officer acting with other members of the executive and heads of
the various departments. Included in such functions are a Directorate for monitoring of
market abuse (e.g. insider trading); the participation bonds industry;
certain trust and depository institutions; and central security depositories
responsible for the safe custody of securities. The FSB is also responsible
for the financial supervision of the Road Accident Fund. Excluded from the FSB’s
responsibilities are some areas involving listing requirements or public
issues and takeovers and mergers. The Registrar may also regulate or prohibit
the sale of unlisted securities. Absolute (hedge) fund products are not regulated at
this time.
The Executive Officer has wide regulatory powers. Regulatory actions include
the cancellation of authorisation to supply financial services. He has formal
powers of investigation with criminal sanctions in the event of obstruction,
and can apply to court for an interdict, mandamus or curatorship of financial
institutions if necessary. He can, in certain circumstances, also apply for
the winding up or placing under judicial management of certain financial
institutions, such as insurers and pension funds. The Executive Officer’s
regulatory powers take effect only where the conduct of an authorised
financial institution appears to have been made in contravention of the law,
or casts doubt on whether it is fit and proper to trade.
The FSB is assisted by an advisory board on financial markets, and advisory committees on long- and
short-term insurance, pension funds, collective investment schemes, and
financial services providers. It maintains a close
relationship with all existing industry associations like those for collective
investments,
participation bonds, and fund managers. It liaises with the international
industry and is a member of the International Organisation of Securities
Commissions (IOSCO) and International Association of Insurance Supervisors (IAIS).
Summary of functions:
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supervise the exercise of control, in terms of any law, over the activities of
financial institutions and over financial services; and |
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advise the Minister of Finance on matters concerning financial institutions and
financial services, either of its own accord or at the request of the Minister; |
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promote programmes and initiatives by financial institutions and bodies
representing the financial services industry to inform and educate users and
potential users of financial products and services. |
Legislation:
The National Credit
Regulator
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 Act requires the Regulator to promote the development of an
accessible credit market, particularly to address the needs of historically
disadvantaged persons, low income persons, and remote, isolated or low density
communities. The NCR is also tasked with the registration of credit providers,
credit bureaux and debt counsellors; and enforcement of compliance with the
Act. The National Credit Regulator is independent and governed by a Board. The
NCR advises the Minister on matters of national policy relating to consumer
credit and reports to the Minister annually.
The Act provides for the creation of a National Consumer Tribunal. The Tribunal is an independent body, separate from the National
Credit Regulator. The Tribunal is tasked with the hearing of cases arising
from non-compliance with the Act as well as issuing of fines for
contraventions thereof. Consumers and Credit providers may appeal to the
Tribunal against the decisions of the NCR.
Legislation and regulations:
Financial exchanges
(self-regulating organisations)
Council for Overseeing Recognised and Statutory Obudsman
Schemes
Functions of Council and Registrar:
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consider and grant or refuse an application
for the recognition of a scheme: |
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monitor compliance with the Act by a
recognised scheme: |
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promote co-operation and co-ordination of the
activities of an ombud of a recognised scheme, the Adjudicator, the Ombud
for Financial Services Providers and the statutory ombud, including in
relation to informing and educating clients with regard to available
resolution forums; |
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after consultation with the relevant ombud,
develop and promote best practices for complaint resolution by the
recognised scheme in question; |
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ensure that the independence and impartiality
of an ombud is not affected when the Council performs its functions; and |
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perform such other functions as the Minister,
after consultation with the board, may direct in order to achieve the
objects of this Act. |
Legislation
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Financial
Services Ombud Schemes Act, [No. 37 of
2004] (assented to in
February 2005)
To provide for the
recognition of financial services ombud schemes; to lay down minimum
requirements for ombud schemes; to promote consumer education with regard to
ombud schemes; to co-ordinate the activities of ombuds of recognised schemes
with the activities of the Pension Funds Adjudicator and the Ombud for
Financial Services Providers; to develop and promote best practices for
complaint resolution; to empower the Ombud for Financial Services Providers
to act as a statutory ombud in certain cases; and to provide for matters
connected therewith. |
Other associated regulatory
bodies
Department of Trade and
Industry
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Companies and close corporations
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Department of Health
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Medical aid and insurance
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Coordination of financial
regulation
Policy Board for Financial
Services and Regulation
T he Policy Board for Financial Services and Regulation, a statutory body in terms of the Policy Board
for Financial Services and Regulation Act, 1993, it includes representation from
stakeholders of the financial system in South Africa. The main task of the board is to advise the Minister of Finance
on policy matters with regard to the regulatory framework for financial
services. An ancillary objective of the Policy Board's activities is that it
ensures competitive neutrality between different functional aspects of financial
legislation.
The Policy Board advises the Minister of
Finance
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on its own accord
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at the request of the Minister
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Executive powers are not assigned to the Policy
Board, but to the
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South African Reserve Bank (Registrar)
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Financial Services Board (Registrars)
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Department of Trade and Industry
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The need for coordination arises from
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the existence of more than one regulatory
authority
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development of multi-functional
institutions and cross-border operations
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The coordination relates to
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financial regulation policy, aimed at
competitive neutrality in terms of principles, standards
and practices
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execution of regulation policy and
supervision, aimed at consolidated supervision of
financial groups, financial conglomerates and
multi-national institutions
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Other advisory bodies or committees have been
established to advise
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the Policy Board on financial services and
regulation policy
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the Registrars with the Reserve Bank and the Financial Services Board on the execution of regulatory
policy and supervision
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Financial Markets Advisory Board (FMAB)
This board was established in 1990 and now mandated in terms of the Securities
Service Act, 2004, advises
the:
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Minister of Finance
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Registrar of Securities Services,
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In terms of section 6 of the Securities Services Act, 2004, the FMAB:
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Conducts any investigation regarding any
matter relating to financial markets and stock exchanges
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Advises the Registrar of Securities Services
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Makes recommendations to the Minister of
Finance
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Advises the Minister on matters referred
to the Board by the Minister
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Advisory
committees
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Short and long-term insurance
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Pension funds
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Collective investment schemes |
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Financial services providers |
Appeal Boards
These have been established for adjudicating in
appeals against decisions of the different Registrars.
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