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The SA Reserve Bank has granted three provisional banking licences this year for the first time in 11 years.

These licences, issued under section 13 of the Banks Act, have gone to Post Bank, TYME (Take Your Money Everywhere) – a local mobile payments start-up acquired by Commonwealth Bank of Australia last year – and, as recently as this week, Discovery Bank.

"When the applications came in, I said to my department, where is the unit that deals with banking licence applications? We have had to put in processes to deal with that," says Kuben Naidoo, registrar of banks.

The firms will need to submit a section 16 licence application within a year. TYME says it hopes to submit one in the next few months, while Postbank, which was granted a section 13 licence in July, plans to submit by May 2017 so it can include financial results for the year to March in its application, says acting Postbank MD Shaheen Adam.

The bank is part of CEO Mark Barnes’s strategy to invigorate the postal service. He recently told Business Times that government was not delivering on its promise to give business to the Post Office, which was threatening its survival. He has also said elsewhere that government needs to put equity into Postbank .

A perceived lack of competition in SA’s banking sector has led to at least three formal inquiries over the past decade. The granting of these licences — with rumours that more are in the pipeline — suggests that the banking landscape is set to change.

Naidoo acknowledges that regulatory hurdles elevate barriers to entry, but adds that regulators must protect depositors and ensure a sound environment in which businesses can operate.

"We think the regulations are appropriate to protect depositors and society from the social cost of a bank failure," he says.

The global financial crisis, which showed how catastrophic the socioeconomic impact of bank failures could be, ushered in a wave of stricter rules for banks. SA, which is a member of the international Basel committee on banking supervision, has aligned itself with these rules.

"This does have consequences on financial inclusion and access to the system," says Naidoo. "We do think competition in the banking sector needs to be enhanced."

He says the Reserve Bank welcomes disruption from new financial technology (fintech) players, but will be careful not to create an unequal playing field, where new players effectively function as banks without having to adhere to the same high standard of capital and liquidity management or anti-money-laundering controls.

Similarly, the Payments Association of SA is formalising new categories of members and plans to amend the National Payment System Act to accommodate technological innovation, says CEO Walter Volker.

"We’re flexible in how we accommodate infrastructure providers, including fintech players," he says, noting that Pasa already regulates players based on their level of participation in the national payments system. Nonetheless, the association recognises that it needs to keep up with innovation.

Digital financial services (DFS) require a more creative regulatory approach, says Sacha Polverini, chairman of the International Telecommunications Union’s DFS focus group.

"Trying to have a totally risk-free environment by putting rules ahead of the market is not the right approach," he says. "Regulators need to test new ways of doing things and then recalibrate the regulatory framework."

Regulations appropriate to protect depositors from the social cost of a bank failure