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Financial Sector Reforms on the Horizon
Government Notice No. 356 of 24 March 2020 Postpones Key Provisions to Take Effect on 1 April 2021
Pretoria, South Africa - The Financial Sector Conduct Authority (FSCA) is set to replace the Financial Services Board (FSB), with key provisions of the Financial Services Ombud Schemes Act expected to take effect on 1 April 2021. According to Government Notice No. 356 of 24 March 2020, the repeal of the Financial Services Ombud Schemes Act will become effective on 31 December 2020.
Overview of FSCA Responsibilities
The FSCA is responsible for:
- Making standards aimed at assisting in maintaining financial stability
- Imposing requirements on providers of payment services
- Enforcing the provisions of the FAIS Act
New Deposit Insurance Scheme
As part of the reforms, a new industry-funded deposit insurance scheme will be established to protect qualifying depositors’ funds up to a specific limit once a bank fails. The scheme will be managed by the South African Reserve Bank (SARB) through a newly established Corporation for Deposit Insurance.
Key features:
- Provides protection for qualifying depositors up to an amount of R100,000 per depositor
- Aligns with international best practice
- Aims to ensure the stability of the financial system
Transactions between Affiliates
In terms of the Banks Act, a bank must manage its business so that the aggregate of certain amounts does not at any time exceed 10% of the bank’s aggregate amount of deposits, current accounts and other creditors. The Prudential Authority must approve any transaction by a bank or its associate to establish or acquire a subsidiary within or outside South Africa.
Range of Permissible and Prohibited Activities
Financial institutions are subject to various legal and regulatory limitations on transactions between a bank and its affiliates. These limitations aim to:
- Prevent excessive risk-taking
- Ensure the soundness of the financial system
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