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The Absa Group headquarters in Johannesburg. Picture: GETTY IMAGES/WALDO SWIEGERS
The Absa Group headquarters in Johannesburg. Picture: GETTY IMAGES/WALDO SWIEGERS

An article by Hilary Joffe suggests not only a misunderstanding of the importance of a tightly regulated relationship between the SA Reserve Bank and SA’s independent financial institutions, but a complete misreading of my reasons for bringing this issue into the public domain in the first place (“Alarm bells ring over Sipho Pityana’s action against Absa and regulator”, October 26).

In essence, Joffe suggests there’s nothing wrong with unlawful informal processes between the regulator and financial institutions, and that somehow the latter institutions — and, presumably, their shareholders, investors and customers — should just sit back and trust the process.

But it is precisely this “cozy” relationship — and the fact that we all deserve to be protected from undue interference — that has triggered my application to the North Gauteng High Court for a declaratory order against the Reserve Bank.

The fact that the Bank, through its Prudential Authority (PA), ran an unlawful informal process over my nomination as chair of Absa has severely prejudiced me. It is not only irregular — it is illegal in terms of section 60 of the Banks Act, and should not be left unchallenged regardless of Joffe’s faith in the system.

It is akin to two friends “meeting at a braai and deciding who should be in charge of a bank”, as one journalist put it in an interview with me this week. And, as the journalist pointed out, “if one of those friends has a grudge against you, well that’s that”.

The two “friends” in this case are my successor at AngloGold Ashanti, Maria Ramos, and the head of the Prudential Authority, Kuben Naidoo, who have long-standing personal, political and professional relationships. Through her proximity to Naidoo, Ramos appears to have been formally proposed by Absa.

We must not underestimate the impact of this undermining of the law and process. The PA’s “objection” means it has concluded that I am not a fit and proper person or that my appointment would not be in the public interest. Such a conclusion can only be harmful to anybody’s reputation. Given its import, such a decision should and could only be reached after a due process that is fair, transparent, rational and credible — which is what the law provides for.

It is important to note that I was never given an opportunity to discuss, test or respond to Ramos’ claims against me. The prejudice and bias shown here is beyond doubt as the PA, as I state in my affidavit, “had no authority to engage with Absa other than pursuant to its express powers under the Banks Act. Instead, it followed a course which rendered the formal process redundant.”

In essence, my argument before the court is as follows:

  • The PA has undermined the Absa board. It has exceeded its powers in law and thereby undermined the authority of a private bank, which stands to erode good corporate governance where the PA should be counted on to promote, encourage and preserve it. It is the role of a board to nominate its directors, who are then elected by shareholders and among them determine its public officers including its chairman.
  • It is not for the PA to determine criteria for suitable candidates, consider a shortlist and appoint a chairman of a board. The PA must only determine whether those identified by the board are fit and proper and/or that it may not be against public interest that they serve on a board of a bank. To do more than that, as in this case, is to usurp the powers of an independent board and is an erosion of good corporate governance.
  • By exceeding its powers in this fashion, the Prudential Authority acts like a deployment committee in the financial services environment. Were this to be allowed it would be to the detriment of our financial services and its credibility.
  • The independence of the Reserve Bank has been compromised. It is my view that the Prudential Authority may have conducted itself in a manner that violated the Bank’s independence as envisaged in the constitution. As I state in court papers: “Through invoking this so-called informal process and its refusal to hear me, the Authority may have allowed itself to be unduly influenced by Ms Ramos and thereby compromised its independence. In acting as it did, the Authority unlawfully thwarted or circumvented the procedures set out in sections 60 (5)(c) and 60 (6)(d) to (k) of the Banks Act and thus exceeded its powers.”

As public institutions the Reserve Bank and the Prudential Authority must be required to act in an accountable and transparent manner. After all, the fact that a private citizen such as Ramos can exert such a high degree of influence over the banking regulator on the choice of the bank’s next chair is highly irregular — and deeply concerning. It is a slippery slope, and it needs to be confronted head-on.

There are important precedents at stake here. As a society we need to stand firm on these important issues of principle rather than argue that there are “special cases” or “special people” — and when processes and laws are abused, they need to be exposed and stopped. For the sake of all of us. 

Via e-mail

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