SOUTH AFRICA’S BANKING INDUSTRY SET FOR MAJOR REGULATORY SHIFTS WITH COFI BILL
The long-awaited Conduct of Financial Institutions (COFI) Bill is on the horizon, and it’s set to have far-reaching implications for South Africa’s banking industry. Although the Bill may not be tabled in Parliament before the May 29 elections, market players are both excited and cautious about its potential impact.
What is the COFI Bill?
At its core, the COFI Bill aims to consolidate thousands of pages of disparate financial legislation into a single standard of industry conduct. This will affect not only traditional financial institutions like banks, insurers, and credit providers but also non-financial institutions such as retailers, fintech companies, telcos, and other organizations that offer financial services.
Key Features of the COFI Bill
- Consolidates existing legislation into a single standard of industry conduct
- Affects traditional financial institutions and non-financial institutions offering financial services
- Introduces an activity-based approach to regulation, where similar activities are uniformly regulated and supervised
- Removes limitations on who can provide services, opening up participation and injecting competition and innovation into the industry
Benefits of the COFI Bill
- Creates a level playing field for institutions offering financial services
- Allows for rapid deployment of new products that benefit local consumers
- Boosts financial inclusion, particularly with the introduction of the instant payment system PayShap
- Drives competition in the market and benefits consumers
Industry Reaction
Network International’s Mpho Sadiki says the Bill has undergone extensive consultation and analysis, with multiple work streams examining existing legislation and its impact. “It gives regulators the scope to govern institutions based on their activity,” he explains.
While some industry players have expressed concerns about the additional regulatory burden, Sadiki argues that this is a misconception. The COFI Bill introduces an activity-based approach, where similar activities are uniformly regulated and supervised, regardless of the type of institution performing them.
“This removes the limitations of who can provide services, opening up participation and injecting competition and innovation into the industry,” Sadiki says. “By creating a level playing field, the legislation allows for rapid deployment of new products that benefit local consumers.”
Conclusion
The COFI Bill is poised to play a significant role in promoting financial inclusion and driving competition in the market. While some challenges lie ahead, many in the industry believe that the benefits of this legislation will far outweigh any drawbacks.
As South Africa transitions towards true open banking, the COFI Bill is set to inject much-needed innovation and competition into the industry, ultimately benefiting local consumers.