New banking laws proposed for South Africa

South Africa’s latest state capture report recommends the introduction of new banking laws – including regulations around when accounts may be closed.

The report’s author, chief justice Raymond Zondo, made the recommendations following the closure of four bank accounts linked to the controversial Gupta family.

First National Bank, Standard Bank, Absa and Nedbank all closed accounts, citing legal obligations, after several suspicious transactions were made. The banks also cited possible reputational damage as a reason for the account closure.

Zondo raised specific concerns about the bank accounts being closed without client consultation, leading to the commission making various findings regarding the ‘unfair’ elements of unilateral bank terminations.

“In Bredenkamp and Others v Standard Bank of SA Ltd the Supreme Court of Appeal (SCA) decided that a bank was not obliged to hear its client’s side of the story before the bank could terminate the relationship,”

“It seems that the SCA’s basis for this decision was that the relationship between a bank and a client is a contractual one,” he said.

In contrast to the SCA’s decision, Zondo said it is unacceptable that an institution as powerful as a bank should have no obligation to hear what a client has to say before the bank may close the client’s account.

He added that this does not align with South Africa’s constitutional values, and a decision to close a client’s bank could have various far-reaching consequences.

As a result of banks’ enormous power, no serious business would be able to run in the country if bank accounts could be terminated unilaterally, said Zondo. Depending on the size of a company, this could have dramatic effects on people retaining their jobs, he said.

It is only fair that banks be required to afford their clients the opportunity to be heard or to make representations to show that there are no grounds for the bank to be concerned if they are suspected of suspicious behaviour, said Zondo.

Zondo recommended that new laws be enacted to introduce the requirement of ‘fairness’ in bank-customer relationships, or that existing legislation is amended to account for the requirement.


Read: The best and worst case scenarios for where South Africa is heading right now – and how likely they are to happen

 

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New banking laws proposed for South Africa