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Cape Town – National Treasury supports a proposal to adapt stringent banking license regulations to allow smaller, black-owned banks to emerge, it said on Wednesday.
It was commenting on a draft report on the transformation of the financial sector, which was discussed at parliament’s standing committee on finance and portfolio committee on trade and industry on Wednesday.
The draft report supported proposals submitted during the hearings for the establishment of a major black-owned bank, citing the R50bn stokvel economy, which could capitalise such a bank. It also supported the urgent bank licence required for Postbank, which National Treasury also supported provided it satisfied the licence requirements.
The report recommended that National Treasury and the regulators considered “ensuring that the licensing and regulatory environment is conducive and encourages the entry of such black-owned banks into the market”.
Ismail Momoniat, head of tax and financial sector policy at National Treasury, told parliament on Wednesday that this could be achieved by developing a tiered bank licensing structure.
“I don’t think everyone should get a licence,” he said. “They have the right to apply and they must meet the criteria, but there must not be any pressure on the regulator.
“We could relook the criteria for new entrants,” he said. “Maybe you need a tiered licencing framework.
"This is consistent with the proposed development framework to be developed for the banking and insurance sectors. It does not mean an unlevel regulatory playing field that favours certain participants with lower requirements for doing the same banking or insurance activity.
"Rather financial institutions with businesses that bring lower prudential risk would need to satisfy proportionately lower regulatory requirements, as is contemplated by the micro-insurance framework provided for under the Insurance Bill currently also in parliament."
He said they need to explore the implications of regulators favouring black-owned firms when issuing banking licenses for first time entrants. “We will need to explore what this means in practice to guard against unintended consequences,” he said.
Competition Commission Commissioner Tembinkosi Bonakele told the Wits Business School in May that banking licenses make it impossible to establish new entrants without the capacity to suffer years of losses.
Bonakele argued for less stringent regulations in small new banks on the basis that they pose very little systemic risk while they are small.
“You do not need to regulate it the way you regulate the big four. As they grow and pose more systemic risk, then you impose the regulations," City Press quoted him as saying.
The interim report also urged National Treasury and the Department of Trade and Industry to work on developing a National Cooperatives Bank.
In this regard, South Africa’s top banks have said they are committed to exploring ways for co-operative banks to emerge, Banking Association of South Africa MD Cas Coovadia told the Cape Town Press Club earlier on Wednesday.
As part of a ramped-up effort to tackle transformation, the banks will look at the ownership structure of banks.
Coovadia said banks are institutionalised and require deep pockets to own; they therefore want to explore why more cooperative banks are not being established. “Through a more diversified ownership, we will get a more diversified sector,” he said.
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