Reserve Bank labels six SA banks as systemically important

The SA Reserve Bank has designated six of SA’s largest banks as systemically important financial institutions (Sifis). 

The banks — Absa, Standard Bank, FirstRand Bank, Nedbank, Investec and Capitec Bank — were named for the first time in the latest edition of the Reserve Bank’s financial stability review, released on Thursday. 

The six banks have all accepted their designation, which was made in line with the Financial Sector Regulation Act, which came into force in 2018.

“Designation as a Sifi does not mean that these banks are seen as relatively riskier institutions, but given their potential systemic impact on the financial system, it is important for the SA Reserve Bank to monitor and regulate their operations and soundness,” the Bank said. 

In addition to the existing regulation and supervision conducted by the Bank’s Prudential Authority, the central bank may impose further requirements on the six institutions, to mitigate potential systemic risks that threaten the soundness of the wider financial system. 

In time, financial institutions from other sectors such as the insurance sector will also be designated, said Hendrik Nel, head of financial stability at the Reserve Bank.

However, globally, the methodology to identify them is still being developed, Nel said. 

donnellyl@businesslive.co.za