Here is the rewritten article in markdown format with proper headings, subheadings, and bullet points:
Regulation of Non-Banking Financial Services
The Financial Sector Regulation Act (FSR Act) regulates non-banking financial services in South Africa. The FSR Act establishes the Financial Sector Conduct Authority (FSCA), which is responsible for regulating and supervising non-banking financial services, including providers of payment services.
Financial Institutions
Banks are subject to regulation by the Prudential Authority, while the FSCA regulates non-banking financial institutions. The Prudential Authority sets prudential requirements for banks, while the FSCA sets conduct requirements.
Key Responsibilities
- Banks: regulated by the Prudential Authority
- Non-banking financial institutions: regulated by the FSCA
Auditing and Governance
The Banking Association (BA) requires that auditors be approved by the Prudential Authority before they can audit a bank or its subsidiary. If a bank is unable to appoint an auditor who has been approved by the Prudential Authority, the Prudential Authority will appoint an auditor for the bank.
Auditing Requirements
- Auditors must be approved by the Prudential Authority
- The Prudential Authority will appoint an auditor if a bank cannot find one
Deposit Insurance
There is no explicit deposit insurance scheme in South Africa, but the Cooperative Banks Deposit Insurance Fund provides limited protection for cooperative banks’ members. The Financial Sector Laws Amendment Bill 2020 proposes to introduce a comprehensive framework for resolving failing banks and establishing an industry-funded deposit insurance scheme.
Key Points
- No explicit deposit insurance scheme exists
- Limited protection provided by the Cooperative Banks Deposit Insurance Fund
- Proposed legislation aims to establish a comprehensive deposit insurance scheme
Transactions between Affiliates
Banks are prohibited from engaging in certain transactions with their affiliates, including investments in debentures or preference shares of associates, advances to associates, and guarantees or other instruments relating to the liabilities or contingent liabilities of associates. The Prudential Authority must approve any transaction by a bank or its associate that has the effect of establishing or acquiring a subsidiary or entering into an agreement having the effect that any company becomes its subsidiary.
Prohibited Transactions
- Investments in debentures or preference shares of associates
- Advances to associates
- Guarantees or other instruments relating to liabilities or contingent liabilities of associates