PRUDENTIAL AUTHORITY
New banks ‘may raise risk, reduce profitability’
The impending entry of new banks including Discovery’s and Tyme’s will reduce profitability and may increase risk in the sector, says Kuben Naidoo, head of the Prudential Authority. Naidoo, who is also deputy governor of the SA Reserve Bank, said the regulator, which oversees the stability of all of the country’s financial institutions, was trying to introduce more competition and lower barriers to entry. At the same time, the authority wanted to maintain stability and ensure a sound financial system. "All of this may lead to lower profitability, and that could mean more risk and more instability. That means we need to be on top of our game," he said in an interview with Business Day on Tuesday. The country has not suffered a banking crisis since the early part of the past decade when a run on small banks culminated in the failure of Saambou in 2002. SA’s five largest retail banks — FNB, Standard Bank, Nedbank, Absa and Capitec — account for 85% of the country’s more than R5-trillio...
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