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Parliament Seeks Comment on Financial Sector Laws Bill

May 5, 2021

Parliament

The standing committee on finance seeks comment on the Financial Sector Laws Amendment Bill.

The bill was tabled in parliament in August 2020.

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

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 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.

Submissions are invited until 17 May 2021.

The committee also seeks comment on the Pension Funds Amendment Bill and the Fiscal Responsibility Bill.

The Pension Funds Amendment Bill, a private member’s bill drawn up by Dr Dion George, a Democratic Alliance member of parliament, was tabled in parliament in November 2020.

According to the bill’s explanatory summary published in September 2020, the bill seeks to amend the Pension Funds Act in order to “allow for pension fund members to obtain a loan, secured by a guarantee from a registered pension fund, to alleviate financial pressure during the COVID-19 emergency or any other emergency similar to COVID-19”.

“The draft Bill provides for a registered pension fund to offer a guarantee to a pension fund member of a maximum of 75% of their share in the value of the fund. By enabling a member to access a pension-backed loan, that member will be able to leverage their pension fund investment prior to their retirement date, without eroding their provision for eventual retirement. Lending institutions will be enabled to offer loans to pension fund members at competitive interest rates and over extended or deferred payment periods given that the loan is fully guaranteed.”

The bill aims to amend the Pension Funds Act of 1956, so as to:


• enable pension fund members to access a percentage of their pension fund before retirement as guarantee for a loan; and
• provide for matters connected therewith.

Comment is invited until 17 May 2021.

The Fiscal Responsibility Bill was tabled in parliament in March 2020.

The proposed legislation, designed to introduce statutory fiscal rules aimed at containing national debt and debt service costs in South Africa, was drawn up by Geordin Hill-Lewis, a Democratic Alliance member of parliament.

The private member’s bill’s explanatory summary was published in Government Gazette 43073 on 6 March 2020.

The explanatory summary points out that, in 2008/2009, the national debt, measured as net loan debt, amounted to R525,6 billion or 21.8% of GDP.

However, the national debt, measured as net loan debt, is expected to increase to R3.35 trillion, or 60.7% of GDP by the end of 2020/21.

It will reach 67.5% of GDP in 2023/2024.

Consequently, debt service costs are set to increase to R232.8 billion in 2020/2021, R264.6 billion in 2021/2022 and R299.1 billion in 2022/23.

The Fiscal Responsibility Bill aims to:


• promote fiscal responsibility by obligating the Republic of South Africa to reduce its debt levels and its exposure to debt;
• introduce fiscal rules for the management of debt and government guarantees;
• provide for reporting requirements;
• provide for the review of the fiscal rules;
• provide for certain exemptions from the fiscal rules;
• increase transparency and fiscal responsibility; and
• provide for matters connected therewith.

The bill’s memorandum points out that South Africa will never be able to allocate funding to areas most in need of support such as basic and higher education, social grants and health care until steps are taken to bring debt levels under control in relation to GDP.

Comment is invited until 24 May 2021.

Meanwhile, in Gazette 44526, the Auditor-General published a Directive in terms of the Public Audit Act.

The Directive focuses on, inter alia, audit functions, annual audit, auditing standards, timing and submission of information for audit purposes and assessment and recognition of the financial reporting frameworks applicable in the public sector.

It applies to financial periods beginning on or after 1 April 2020.