South Africa’s Banking Industry Set for Regulatory Updates
Enhanced Financial Supervision and Protection
The South African Reserve Bank (SARB) is currently drafting new standards for deposit-taking institutions, with a focus on providing enhanced financial supervision and protection for depositors. As part of its Prudential Authority (PA) Regulatory Strategy 2021-2024, the SARB has identified eight key priorities that require regulatory upgrades and supervisor interventions for mutual banks and cooperative banks.
Key Priorities for Regulatory Upgrades
The new standards will cover:
- Governance and risk management
- Credit risk
- Operational risk
- Capital
- Liquidity risk
- Interest rate risk in the banking book (IRRBB)
- Economic returns
- Financial soundness
Relevant changes are expected to be published for public consultation during the upcoming financial year.
Focus on Mutual Banks, Cooperative Institutions
The SARB’s move comes as the global banking space is dealing with the aftermath of several bank failures, including those in the UK and Switzerland. The governor of the SARB, Letsetja Kganyago, said that while the recent bank failures had no direct impact on South Africa, it was essential to monitor such developments.
Innovation and Risk Mitigation
The SARB aims to foster innovation in a safe manner while mitigating potential risks associated with the rise of fintech. The bank believes that public policy objectives remain relevant to ensure the continued safety and stability of the financial system.
Recent Developments and Regulatory Updates
In recent developments, the National Treasury published amendments to regulations relating to section 90 of the Banks Act 94 of 1990. These amendments incorporated revised internationally agreed frameworks published by the Basel Committee on Banking Supervision (BCBS).
The BCBS’s revised securitisation framework was implemented with effect from October 1, 2022, while its revised framework for banks’ exposure to IRRBB was implemented with effect from January 1, 2023. The SARB is expected to release further updates on regulatory changes in the coming financial year.
Conclusion
The South African Reserve Bank’s move to enhance financial supervision and protection for depositors comes as a welcome development in an era of increasing banking risks globally. By fostering innovation while mitigating potential risks, the SARB aims to ensure the continued safety and stability of the financial system.