Support financial entrants to reduce banks’ monopoly, say MPs
BUSINESSLIVE / 28 NOVEMBER 2017 - 05:48 / LINDA ENSOR
Parliament’s finance and trade and industry committees to table their report on financial sector transformation
The government and other relevant institutions need to focus on reducing the monopoly in the banking and insurance sectors by encouraging new entrants, Parliament’s finance and trade and industry committees have recommended in their report on financial sector transformation.
Call to commit: Hawkers sell their wares near the headquarters of the South African Reserve Bank, in the central business district in Pretoria. Parliamentary committees say the Bank should do more to encourage competition in the financial sector. Picture: WALDO SWIEGERS/BLOOMBERG
The report, which is to be tabled in Parliament on Tuesday, is based on extensive public hearings held over the past year. Submissions were received from a wide range of stakeholders including government departments, regulatory and other statutory agencies, industry bodies, business, labour, civil society, political organisations and individuals.
The committees’ overall view was that the financial sector had transformed since 1994 but that more needed to be done. Their report noted the "huge frustration and anger" among financially marginalised constituencies at what they saw as the failures of the financial sector and the slow pace of its transformation. The inadequate performance of the Financial Sector Charter Council was partly responsible for this lack of transformation, the report said.
The charter itself should set reasonable time frames within which the South African ownership of banks be held mainly by blacks and particularly Africans, with women being adequately represented
It recommended that effective fines be imposed for the failure of financial institutions to achieve the charter targets.
The Black Economic Empowerment Commission was mandated to develop a system of fines and present a policy on this by June 2018. The report recommended that consideration be given to amending the Broad-Based Black Economic Empowerment Act and codes to provide for punitive sanctions.
The committees urged that newcomers be encouraged into the banking sector (90% of which is under the control of the four big banks) and that compliance with the Financial Sector Charter be made a condition of licensing.
The charter itself should set reasonable time frames within which the South African ownership of banks be held mainly by blacks and particularly Africans, with women being adequately represented.
Blacks and particularly Africans should also be the majority at all levels of management, with adequate inclusion for women as well.
The Treasury was urged to consider ways in which black and female ownership of the major banks could be effected and to report on this regularly. Consideration should be given to legislative changes to allow for proportional entry requirements for entrants into the sector.
This would reduce barriers to entry for new players and allow small informal entities like stokvels to grow.
Lower capital adequacy requirements could be imposed for entities that are not systemically important for the banking system, with the caveat that minimum standards be applied to protect depositors’ interests.
Similar recommendations were made with regard to the insurance industry.
The committees also argued that the Reserve Bank should do more to encourage competition in the financial sector.
"The committees believe that there should be a diversified and more competitive financial sector comprising private, co-operative and state banks."
The committees did not expect that all their recommendations would be implemented immediately.
LINK - https://www.businesslive.co.za/bd/national/2017-11-28-support-financial-entrants-to-reduce-banks-monopoly-say-mps/
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