Legislation: Amendments to Financial Sector Act address bank failure

Provision for an ‘explicit deposit insurance scheme for banks’ is a ‘key component’ of legislation being developed to amend the 2017 Financial Sector Regulation Act, reports Legalbrief Policy Watch. South African Reserve Bank (SARB) deputy governor Francois Groepe confirmed this last week in his introductory remarks to the central bank’s first six-monthly financial stability review for 2018. Drafted in liaison with National Treasury, once in force the amendments will ‘protect depositors from losses in the event of a bank failure’.

According to Fin24, among other things the SARB’s latest review warns that the ‘inability of state-owned companies to roll over debt could threaten SA’s financial stability’ – which the Act requires the central bank to protect in terms of its expanded mandate. To that end, the country’s new Prudential Authority was launched recently under the SARB’s jurisdiction as one arm of the ‘twin peaks’ approach to financial sector regulation. The other arm is a Financial Sector Conduct Authority, which has replaced the Financial Services Board.