The Financial Sector Conduct Authority (FSCA) has published its draft strategy for promoting transformation in South Africa’s banking and finance sector.
The financial sector is a key contributor to the South African economy and is an important component in driving a transformation of the economy and ensuring greater inclusivity in economic activities, the regulator said.
“Since democracy, there has been some progress made toward both economic transformation in general and financial sector transformation specifically.
“However, it is well acknowledged that the extent to which the majority of South Africans participate meaningfully in the financial sector remains limited.”
Parliamentary hearings regarding transformation of the financial sector were held in the first half of 2017. Submissions from the public emphasised, amongst others, concerns with the heavy concentration of the sector, high barriers to entry for new or emerging entrants, and the need for much stronger support of black industrialists and small to medium enterprises (SMEs).
Submissions also noted the prevalence of poor market conduct practices and financial exclusion, compromising the transformative effects of the sector.
To address these transformation issues, the FSCA proposes additional powers to impose administrative penalties on companies that fail to meet transformation targets. Other proposals include:
- Meeting with the board of the institution and engaging on the importance of transformation as a national imperative;
- Requesting a remedial plan to address the shortcomings, which can take the form of an enforceable undertaking;
- Issuing a directive for non-compliance with an enforceable undertaking;
- Issuing an administrative penalty for non-compliance with COFI Act transformation requirements, an enforceable undertaking or directive.
“It is important to note that the FSCA mandate would be limited to enforcing financial sector laws only, and not the B-BBEE Act or the FS Code, which are the responsibility of the B-BBEE Commission and FSTC respectively,” it said.
The government has previously indicated that South Africa’s financial and asset management sector will see a transformation push through the introduction of the Conduct of Financial Institutions Bill.
Deputy finance minister David Masondo said that changes included in the bill will make transformation an explicit function of the Financial Sector Conduct Authority (FSCA).
Masondo said it will also be a requirement for financial institutions, such as banks, to have transformation plans that demonstrate their compliance with existing Black Economic Empowerment legislation.