South Africa’s next big bank could be on its way
The National Treasury has published the Financial Matters Bill for public comment.
Among other changes, the bill is seeking to amend the Banks Act to allow for qualifying state-owned companies to apply for banking licenses.
“Under the Companies Act (2008), state-owned companies are no longer classified as public companies,” it explains.
“Currently, the Banks Act only allows for public companies to establish a bank. As a result, state-owned companies meeting the prudential and other requirements of the Banks Act, are unable to apply for authorisation to establish a bank.”
The legislation acknowledges that because these banks are backed by the government, they may be open to abuse as whey would be able to continue to operate despite not being a going concern.
To combat this, the new bill proposes that only qualifying state-owned companies that are ‘financially sound’ may apply for authorisation to establish a bank.
For this purpose, the bill proposes that:
- A state-owned company must first obtain the approval of the minister of finance, acting with the concurrence of the minister responsible for the state-owned company, to apply for authorisation to establish a bank; and
- The assets of the company, its holding company and, if applicable, the holding company of its holding company, must exceed its liabilities.
Reserve Bank
The publication of the Financial Matters Bill follows recent plans to nationalise the South African Reserve Bank (SARB).
Addressing, the 98th ordinary general meeting of SARB shareholders at the end of July, Governor of the SARB, Lesetja Kganyago, admitted that there was no strong argument, in principle, in favour of retaining private shareholders.
However, he cautioned that nationalising the SARB could end up being both a costly and messy process.
“We are concerned that the process could be expensive, as the shares trade for far less than what some existing shareholders are prepared to sell their shares for,” he said.
“Indeed, it is the case that a group of shareholders is agitating for the SARB’s nationalisation as they believe that they are entitled to a share of the assets of the SARB and see this as an opportunity to make enormous profits at the expense of taxpayers.
“This could turn out to be a protracted legal process and a very expensive exercise for what would, at best, be a cosmetic gain.”
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