Parliament gives green light to Financial Sector Laws Bill

concurrent jurisdiction
03 Jan 2022

Parliament has passed the Financial Sector Laws Amendment Bill and sent it to president Ramaphosa for assent.

The bill was tabled in parliament in August 2020.

Cabinet approved the bill in June 2020 for tabling in parliament.

In its statement, cabinet pointed out that the bill proposes to designate the Reserve Bank (SARB) as the Resolution Authority and strengthens the SARB’s regulatory tools designed to ensure stability of the financial system.

The standing committee on finance sought comment on the bill in May 2021.

The committee adopted the bill with amendments.

The national assembly passed the bill and sent it to the national council of provinces (NCOP) for concurrence in September 2021.

The NCOP sought comment on the bill in October 2021.

In an earlier statement, national treasury indicated that the bill is “part of the Twin Peaks reform of the financial regulatory system applicable to the financial sector”.

The proposed legislation also aims to introduce South Africa’s first comprehensive deposit insurance scheme that will ensure that depositors are paid their funds when a bank fails.

Some of the acts to be amended include the Insolvency Act, the South African Reserve Bank Act, the Banks Act, the Mutual Banks Act, the Competition Act, the Financial Markets Act, the Insurance Act and the Financial Sector Regulation Act.

Amendments are proposed to the Insolvency Act to clarify that the provisions of the Financial Sector Regulation Act of 2017 apply to the liquidation or sequestration of the estate of a designated institution; to exclude dispositions made in case of resolution from the application of the Insolvency Act and to clarify and refine the application of certain provisions of the Insolvency Act.

Proposed amendments to the Competition Act of 1998 aim to exclude transactions in relation to resolution from the application of certain provisions; and to provide for consultation with the Competition Commission in relation to certain transactions.

Proposed amendments to the Financial Sector Regulation Act of 2017 aim to provide for the establishment of a framework for the resolution of designated institutions to ensure that the impact or potential impact of a failure of a designated institution on financial stability is managed appropriately; to designate the Reserve Bank as the resolution authority; to establish a deposit insurance scheme, including a Corporation for Deposit Insurance and a Deposit Insurance Fund; to provide for co-ordination, co-operation, collaboration and consultation between the Corporation for Deposit Insurance and other entities in relation to financial stability and the functions of those entities; to make provision for designated institutions in connection with resolution matters; to further provide for information required to assess a levy; to effect consequential and technical amendments to certain provisions and to accordingly amend the long title and the Arrangement of Sections.

Treasury briefed the select committee on finance on the bill in June 2021.

In the briefing, treasury highlighted key proposals in the bill including enhancing the Reserve Bank’s financial stability mandate and expanding its objective for depositor protection; stabilisation powers to include bail-in, transfer of certain assets and liabilities as well as the creation of bridge institutions; Resolution Authority (i.e. Reserve Bank) to be responsible for the development of resolution plans for all designated institutions and safeguards to include a new proposed creditor hierarchy and adherence to the ‘no creditor worse off’ principle.

The select committee adopted the bill without amendments.

Meanwhile, treasury has published two papers on proposed further retirement reforms for public comment.

In a statement, treasury points out that the first paper entitled ‘Encouraging South African Households to Save More for Retirement’, flows from the recent announcement by the finance minister in the November 2021 MTBPS speech and previous announcements in the 2021 Budget on “boosting household savings by increasing preservation before retirement and increasing flexibility through partial access to retirement funds through a “two-pot” system”.

According to treasury, the proposed two-pot system will enable the restructuring of retirement contributions into two pots.

“One pot is to be preserved until retirement (two-thirds), while the other would enable pre-retirement access (one-third).”

The second paper, entitled ‘Governance of Umbrella Funds’, aims to improve governance in retirement funds in general with particular focus on commercial umbrella funds.

“Key amongst these is the deviation from the norm of having 50% employee representation in a commercial umbrella fund.”

Comment on the two papers is invited until 31 January 2022.

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(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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