South African Banking Regulations: A Comprehensive Overview
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Prudential Regime
The Bank Regulations in South Africa emphasize the importance of prudent risk management for banks. This regime requires banks to develop comprehensive risk-management processes and board-approved policies and procedures to address various risks.
Key Requirements:
- Manage risks prudently and appropriately by setting capital targets commensurate with their risk profile and control environment.
- Develop comprehensive risk-management processes and board-approved policies and procedures to address risks.
- Ensure that management of risks is prudent and appropriate.
Capital Requirements
South Africa has adopted Basel III risk-based capital regulations, which are consistent with international practice. Elements of Basel III are still being implemented through 2025.
Key Requirements:
- Maintain a minimum common equity Tier 1 (CET1) capital ratio of 7%.
- Meet a total regulatory capital requirement (TRC) of 10.25%.
Liquidity Requirements
Banks in South Africa must maintain sufficient liquidity to meet their short-term obligations, including deposit outflows and payment requirements.
Key Requirements:
- Hold liquid assets in an amount that is at least equal to the bank’s net cash outflow requirements over a specified period.
- Ensure adequate liquidity management practices.
Risk Management
The Bank Regulations require banks to develop comprehensive risk-management processes and board-approved policies and procedures to address risks. Banks must ensure that their management of risks is prudent and appropriate by setting capital targets commensurate with their risk profile and control environment.
Key Requirements:
- Develop comprehensive risk-management processes and board-approved policies and procedures to address risks.
- Ensure that management of risks is prudent and appropriate.
Deposit Protection
South Africa’s deposit protection regime has been established, but not all aspects have come into effect. The Corporation for Deposit Insurance (CoDI) was established as a subsidiary of the South African Reserve Bank on 24 March 2023, and qualifying deposits will be covered up to ZAR100,000.
Key Requirements:
- Ensure that deposits are eligible for protection under the regime.
- Comply with regulations regarding deposit insurance.
Depositor Protection Regime
The FSRA provides the framework for CoDI’s operations, including the establishment of the deposit insurance fund (DIF) and the investment of DIF funds. However, some sections of the FSRA have not yet been declared effective by the Minister of Finance.
Key Requirements:
- Comply with regulations regarding deposit insurance.
- Ensure that deposits are eligible for protection under the regime.
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 Protection of Personal Information Act (POPIA). Banks must treat customer personal information as private and confidential unless required by law to disclose it or with the customer’s consent.
Key Requirements:
- Treat customer personal information as private and confidential.
- Comply with regulations regarding bank secrecy.