EFF banks amendment bill: It's in the details, say stakeholders

The Economic Freedom Fighters have proposed amendments to a bill allowing the State to own banks, and while the bill's objective has been supported by various stakeholders, technical issues must still be ironed out.

On Tuesday, the EFF’s Floyd Shivambu presented the amendments to the Banks Act - which he introduced as a private member’s bill - to the Standing Committee of Finance, of which he is also a member.

The Banking Association of South Africa, National Treasury and Cosatu were among those in attendance, and also made submissions on the amendment bill.

Shivambu said the current Banks Act only permits public companies to own banks, and does not explicitly permit the State to own banks.

The State, however, owns "quasi banks" which are not regulated and cannot perform certain functions.

The proposed amendments will enable a state-owned company to register and conduct the business of a bank and control it.

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Finance Minister Nhlanhla Nene, in a letter to the committee, indicated that the bill was in line with government’s own objectives to ensure all entities that provide financial services are regulated in the same way.

However, Nene said that the Financial Matters Amendment Bill – the executive’s bill, which is out for public consultation – achieves substantially more than the private member’s bill.

Limit fiscal risks

Nene explained that the executive’s bill has a solvency requirement and has the executive’s approval, to limit the fiscal risks of state-owned banks.

Shivambu, in turn, said the Financial Matters bill only "scratches the surface" and does not deal "substantively" with the Banks Act, as it also addresses four other legislations.

"It does not do justice to scratch the surface of legislation," he told the committee.

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Cas Coovadia, managing director of the Banking Association of South Africa (BASA) whose affiliates include ABSA, African Bank, Capitec and Citi Bank, also wrote to the committee. BASA also supports the view that all new banks are subject to the same regulatory supervision enforced by the SA Reserve Bank.

"We are of the view that this will ensure a level playing field in terms of prudential, governance and risk standards which the entirety of the financial sector is subject to.

"Furthermore, supervision for any new banks should be in line with the type of products and services such banks offer," the letter read.

Nobambo Mlandu, BASA’s manager of prudential, who represented the association at Parliament, emphasised that new banks be subject to the same regulatory and supervisory provisions.

She said the state-owned banks should also be subject to capital requirements as set out in the Bank’s Act in order to be issued an operational licence.

'Too broad'

Cosatu, in its submission, said it supported the objective of the bill as it would cater to workers and the poor. But Cosatu is concerned that the scope of the bill is too broad and not specific on which state-owned companies could qualify to establish banks.

"This is critical given the kind of crises most of our SOEs find themselves in."

Cosatu would be wary of Eskom, SAA, SABC or Denel establishing banks, given their state of governance and financial mismanagement, the federation said.

Scof chair Yunus Carrim outlined the limited time to address the entire bill within this financial year, but it is among three bills to be prioritised. 

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