Cosatu parliamentary coordinator Matthew Parks. Picture: SUPPLIED
Cosatu parliamentary coordinator Matthew Parks. Picture: SUPPLIED

The banking industry has no objection to the introduction of the state as a potential owner or operator of competitors as long as they were regulated in the same way as all other banks. 

This was according to the Banking Association SA's (Basa's) submission during parliamentary hearings held by the finance committee on Tuesday, on the Financial Matters Amendment Bill. The bill has a provision that will allow authorised state-owned enterprises to set up a bank.

The ANC adopted a resolution at its last national congress that the state establish a bank.

“We support all new banks in SA insofar as they are subject to similar legislative and regulatory supervision to ensure a level playing field,” Basa GM of strategic projects Gary Haylett said.

Basa approved the fact that conditions and limitations would be placed on which state-owned enterprises would be eligible to establish a bank. However, Haylett said Basa remained concerned regarding the funding mechanism for the proposed bank, challenges facing state-owned companies and potential conflicts of interest.

“We place reliance on the SA Reserve Bank and the Prudential Authority to discharge their responsibilities and objectives without fear or favour in their respective supervision of regulated financial institutions, including state-owned banks,” Haylett said.

The bill states that only a state-owned enterprise approved by the minister and with the concurrence of the responsible minister can apply for authorisation to establish a bank.

The application will have to include a declaration by the auditor of the state-owned company certifying that for the period of 24 months immediately preceding the date of application the assets of both the company, its holding company and the holding company of the holding company exceeded their liabilities.

Union federation Cosatu's parliamentary co-ordinator, Matthew Parks, said it supported the proposal that state-owned enterprises be granted banking licences.

“These are in line with Cosatu’s long-standing calls to open up the banking sector to competition. We believe there is a critical need to allow for state banks to enter the sector.

“This will help to inject badly needed competition to a sector that has been heavily characterised by monopolies, collusion, high charges and interest rates, lack of transformation and a general reluctance to support the needs of the poor and workers.”

Parks said Cosatu supported the provision that state-owned enterprises would not be exempt from any of the existing banking licence requirements.

“Consumers and industry need to be assured that all banks, including state banks, are held to the highest standards and codes of conduct,” Parks said. He noted that it would be taxpayers that would have to pay the bill if a state bank collapsed, so there was a need for strong oversight provisions to minimise such risks.

Cosatu proposed that cabinet approval for the establishment of a state-owned bank be included in the bill as an additional oversight mechanism. Also, parliament must be given notification by the relevant ministers of the intention of a state-owned enterprise to apply for a banking licence and given a reasonable time (for example 30 days) to comment.

Cosatu also wants the public to have the opportunity to comment on the proposed application and has asked for an amendment to the bill, which would require the relevant ministers to gazette and advertise for public comment the intention of the state-owned enterprise to apply for a banking licence.

“Cosatu believes such an oversight mechanism is critical and must be included,” Parks said.

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