Financial Crime World

Banking Regulatory Framework in South Africa

Licensing Requirements for Banks

In South Africa, banks must obtain a license from the Financial Sector Conduct Authority (FSCA) before commencing their business. The FSCA is responsible for regulating and supervising banks to ensure their compliance with laws and regulations.

  • Licensing Process: Banks must meet specific requirements, such as having sufficient capital, experienced management, and adequate risk-management processes.
  • Ongoing Supervision: The FSCA conducts regular inspections and monitoring to ensure that banks continue to comply with regulatory requirements.

Resolution Regime for Unlawful Activities

South Africa’s resolution regime empowers high courts to make orders of forfeiture of property that constitutes the proceeds of unlawful activity. This allows for the recovery of assets in cases where a bank has been involved in illegal activities.

  • Asset Recovery: The resolution regime enables authorities to recover assets, such as money or property, that have been obtained through unlawful means.
  • Protection of Depositors: In cases where a bank is found to be involved in unlawful activities, the depositor protection regime ensures that depositors are protected and reimbursed for their losses.

Deposition Protection Regime

The newly established depositor protection regime in South Africa includes the Corporation for Deposit Insurance (CoDI) and the deposit insurance fund (DIF). CoDI is responsible for protecting deposits in licensed banks up to a certain amount, with the DIF being used to reimburse depositors or make payments under an agreement relating to a resolution action.

  • Deposit Protection: Depositors are protected up to a certain amount, ensuring that they can access their funds even in cases where a bank is experiencing financial difficulties.
  • Resolution Actions: The depositor protection regime enables authorities to take swift and effective action in cases where a bank requires resolution.

Bank Secrecy

There are various sources of South African law relating to a bank’s duty of secrecy, including the Constitution, Code of Banking Practice, and the Protection of Personal Information Act (POPIA). These laws provide for confidentiality and protection of customer personal information, with certain exceptions where disclosure is required by law or necessary for legitimate business purposes.

  • Confidentiality: Banks are required to maintain the confidentiality of customer personal information.
  • Exceptions: There are certain exceptions where banks may be required to disclose customer information, such as in cases where it is necessary for law enforcement purposes.

Prudential Regime

South Africa has implemented the Basel III risk-based capital regulations, which require banks to manage risks prudently and develop comprehensive risk-management processes and board-approved policies and procedures.

  • Risk Management: Banks are required to develop robust risk-management processes to ensure that they can withstand financial shocks.
  • Compliance: The Basel III regulations require banks to comply with specific requirements, such as maintaining adequate capital levels and developing effective risk-management processes.