Cosatu's Matthew Parks. Picture: SUPPLIED
Cosatu's Matthew Parks. Picture: SUPPLIED

Union federation Cosatu is pushing for more oversight and accountability in the establishment of state-owned banks. But it does not want the the Financial Matters Amendment Bill — which includes the enabling provisions for state-owned banks — to be delayed by the National Council of Provinces (NCOP) so is suggesting its proposed amendments be taken up by the next parliament.

The bill, which has already been approved by the National Assembly was the subject of public hearings by the NCOP select committee on finance on Tuesday. It provides for the establishment of state-owned banks by state-owned enterprises (SOEs) under specific conditions, including that the assets of the SOEs must exceed their liabilities.

The Treasury, however, does not agree with Cosatu’s proposals.

The bill requires that the finance minister and the minister with authority over the SOE intending to establish a state-owned bank approve its application for a bank licence. Cosatu wants the bill to include the need for Cabinet approval as well.

“The Cabinet normally approves a variety of executive decisions ranging from the approval of bills, appointment of SOE boards and the employment of directors-general and even deputy directors-general,” Cosatu parliamentary co-ordinator Matthew Parks told MPs.

“The granting of bank licences to SOEs potentially carries significant financial exposure to the state, yet no role is provided for in the bill for Cabinet approval. Cosatu believes that such an oversight mechanism is critical and must be included.”

However, Treasury chief director of legislation Empie van Schoor noted that the minister in charge of an SOE is the shareholder, and both they and the finance minister are members of Cabinet. “Legally, the authority lies with these two ministers,” she said. “These ministers may consult the Cabinet but should ultimately take the decision.” 

Van Schoor noted that the Prudential Authority would have to decide whether the application for a banking licence met the statutory requirements.

Allowed to comment

Cosatu also wants an amendment providing for parliament to be notified of the intention of an SOE to apply for a banking licence and to be given time to comment on it. “It is common practice for parliament to be given space to be informed of and comment on regulations, policies, ministerial directives,” Parks said.

But Van Schoor disagreed, saying the decision to authorise an SOE application for a banking licence is one taken by the ministers and, finally, the regulator and is administrative in nature. Parliament always have oversight of ministerial decisions.

Finally, Cosatu believed that the public should also be given the opportunity to comment after publication of the intention of an SOE to apply for a banking licence in the Government Gazette.

Parks said Cosatu supports the establishment of state-owned banks as this would enhance competition in the banking industry, encourage more affordable banking products and spur economic growth. It also supports the provision in the bill that state-owned banks will not be exempt from any of the existing banking licence requirements of the Banks Act and that they will also be accountable to the Reserve Bank.

Said Parks, “Consumers and industry need to be assured that all banks, especially state banks, are held to the highest standards and codes of conduct. It is workers and the poor who are the first to suffer when there is a failure of good governance in banks, for example African Bank. It is taxpayers who are called upon to pay bailouts when banks collapse.”