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Banking and Financial Services Regulatory: Key developments during 2021

8 December 2021
– 9 Minute Read


As 2021 comes to a close, we unpack some of the developments in the banking and financial services regulatory space, particularly those concerning crypto assets, payments, economic, social and governance (ESG) considerations, and over-the-counter (OTC) derivatives.

Crypto Assets

On 11 June 2021, the Intergovernmental Fintech Working Group (IFWG) issued a position paper on crypto assets (Position Paper). In essence, the IFWG indicated that crypto assets cannot remain outside of the South African regulatory purview and recommended that South Africa employs a staged approach to bring crypto assets within the regulatory remit through the regulation of crypto asset service providers (CASPs).

The decision to regulate the crypto assets environment does not signal or suggest an endorsement of crypto assets by the IFWG. Rather, the core purpose is to subject CASPs to regulatory supervision and oversight given, among other things, that the continued non-regulation of the industry has increased the opportunity for fraud, consumer abuse and market misconduct.

The Position Paper makes recommendations that focus on three main areas: anti-money laundering and combating the financing of terrorism, exchange control regulation and financial sector laws.

Seemingly in reaction to the release of the Position Paper, we saw two considerable movements in the regulatory environment:

  • The Financial Surveillance Department (FSD) of the South African Reserve Bank (SARB) indicated that the SARB does not currently oversee, supervise or regulate crypto assets, but continues to monitor this area.

    Further, the FSD indicated that crypto assets are not legal tender in South Africa and, from an exchange control perspective, the FSD is unable to approve any transactions of this nature.  

    In addition, without permission from National Treasury, the disposal of crypto assets ‘offshore’ is export of capital and a criminal offence. 

    The practical effect of this is that various banks have prohibited their clients from purchasing crypto assets with their bank cards.

  • On 29 October 2021, draft amendments to Regulation 28 of the Pension Funds Act, 1956, were published in the Government Gazette by National Treasury.  

    The amendments seek to prohibit pension funds from investing directly or indirectly into crypto assets given that they are seen to be high risk investments.  

    David Geral, head of Banking and Financial Services Regulatory at Bowmans in South Africa, weighed in on the draft amendments in an article available here and radio interview available here.

From these developments, it appears that, despite the Position Paper, some regulatory spheres continue to maintain a conservative approach towards crypto assets by inhibiting, if not preventing, their use. 


On 1 March 2021, the National Payment System Department of SARB issued a consultation paper on the feasibility of establishing a domestic card scheme in South Africa (Consultation Paper). 

The purpose of the consultation paper was to obtain views on the feasibility of establishing a domestic card scheme which could be leveraged to better serve the unbanked market and increase competition within the payments landscape.

The SARB noted that the success of a sustainable domestic card scheme would depend on the collective effort and support of card issuers, card acquirers, retailers, consumers, regulators, policymakers, government departments, government agencies, financial technology companies and other interested parties.

Environmental, social and governance considerations

ESG and impact: Draft green finance taxonomy published

The South African National Treasury published the Working Draft Green Finance Taxonomy in June 2021 (Working Draft) with the aim of unlocking access to sustainable finance and stimulating the allocation of capital to support a development-focused and climate-resilient economy. 

The Working Draft provides guidance on how to use the taxonomy (defining a minimum set of assets, projects, and sectors that are eligible to be defined as ‘green’ in line with international best practice and national priorities) to determine taxonomic-alignment as well as guidance to determine financial metrics and related impact metrics.

It can be used by investors, issuers and other financial sector participants to track, monitor, and demonstrate the credentials of their green activities in a more confident and efficient way.

Asset Owners Forum South Africa launched

The Asset Owners Forum South Africa (AOFSA), an open and voluntary coalition of retirement funds aiming to pursue suitable investments into private markets such as real assets and other alternatives, was officially launched on 19 November 2021. 

Twelve South African retirement funds with an estimated ZAR 3 trillion in assets under management have established AOFSA to collaborate regarding infrastructure investment in South Africa and will focus on project consideration and analysis for investment. 

AOFSA intends to align key investments in infrastructure and other alternatives to maximise the positive socio-economic impact of their investments.

RisCura report ‘Moving the needle’

Bowmans contributed to a new report compiled by financial research company, RisCura, titled ‘Moving the Needle – Stewardship in South Africa’.

Among other things, this report reveals that the social aspect of ESG tends to be neglected and, as such, RisCura has suggested that managers should challenge themselves to do better in all the three key ESG measures.

Despite this, the RisCura report suggests that local asset managers are taking greater responsibility for the sustainability of the assets under their stewardship.

ESG Disclosures Guidance Manual

The Nairobi Securities Exchange (NSE) published an ESG Disclosures Guidance Manual (ESG Manual) at the end of November 2021. 

The ESG Manual provides listed companies with a guide on how they can ‘collect, analyse, and publicly disclose important ESG information’, in a way that aligns with international reporting standards, including the Global Reporting Initiative Standards, 2018.

Under the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015, the boards of listed companies in Kenya were already required to consider the ESG impact of their businesses and formalise strategies that promote sustainability.

However, the reality is that, while for the past few years many listed companies had already implemented some form of ESG reporting not only to meet the demands of the growing number of institutional and sovereign investors with ESG investing approaches, but also as a means of pursuing long-term economic growth in a more sustained way, there were no clear reporting standards that applied and there was an inconsistent approach to ESG practices.

The ESG Manual now formally provides guidance on how listed companies can integrate ESG into their operations, progressively monitor their ESG practices, and consistently report and make the right type of disclosures in relation to their ESG strategies.

Listed companies in Kenya have been granted a one-year grace period to integrate and comply with the ESG reporting requirements.  This may seem aggressive but has been a long time coming and comes as no surprise. 

The Capital Markets Authority of Kenya and the NSE are also in discussions to introduce an ESG index which will track the performance of companies with superior ESG practices. This is in line with the global trend of investors moving away from purely focusing on financial performance and short-term gains and instead taking a view on longer-term sustainability in investment performance.

Legal Framework for Impact Report: Sustainability impact in investor decision-making

Bowmans contributed to the South African section of the ‘Legal Framework for Impact Report’ compiled by Freshfields Bruckhaus Deringer LLP (Freshfields) and commissioned by The Generation Foundation, Principles for Responsible Investment and the United Nations Environment Programme Finance Initiative. 

This report was released by Freshfields on 21 July 2021 and relates to ‘investing for sustainability impact’ (IFSI) and where it fits in the current investment landscape. It is a first of its kind providing a comprehensive analysis of how far the law requires or allows investors to take deliberate steps to tackle sustainability challenges in respect of IFSI.

This report also looks at the need for three elements when considering IFSI from the perspective of legal rules: the clarity about the impact goal being pursued; the ability to assess how far a goal has been achieved; and an understanding of the causal link between an investor’s activity and a given outcome. 

The report also touches on emerging frameworks for goal setting and assessment, and the challenges of doing so.  In this regard, its detailed legal analysis shows investors that they should feel empowered to rethink conventional investment paradigms by considering risk, return and impact as the pillars of successful investment practice. 

The report also surveys the growing evidence that investors are often motivated not only by a desire to earn a financial return, but also want to support sustainability outcomes consistent with the idea of IFSI.

OTC Derivatives

OTC derivative provider licence applications

In terms of the Regulations released under the Financial Market Act, 2002 (FMA Regulations), principal issuers of OTC derivatives had until 14 June 2019 to apply for authorisation as an OTC derivatives provider (ODP). 

Only authorised ODPs and ODPs that have not been authorised but submitted their ODP applications by 14 June 2019 are currently allowed to offer OTC derivatives in South Africa. 

The FSCA is still in the process of considering the many applications submitted to it. It is noteworthy, however, that at the start of 2020, the FSCA had only approved five local ODPs, which were predominantly the big South African banks. Currently, there are 13 approved ODPs.

An interesting case decided this year was JP Markets (Pty) Ltd v FSCA (Case no 460/2021) [2021] ZASCA 14.

On 20 October 2021, the Supreme Court of Appeal (SCA) set aside the decision of the High Court to place JP Markets (Pty) Ltd (JP Markets) into liquidation. This was after the FSCA launched an urgent High Court application for the liquidation of JP Markets. 

The FSCA contended that JP Markets required authorisation as an ODP in order to conduct the business of an ODP. JP Markets had in fact applied for an ODP licence, but at the time of hearing the urgent application in the High Court and the appeal in the SCA, the application for an ODP licence was still pending before the FSCA. 

The SCA held that the liquidation of JP Markets prior to the determination by the FSCA of its ODP licence application would not achieve the objects of the FMA and that the winding-up of JP Markets in the circumstance was neither just nor equitable.

Concluding remarks

In conclusion, 2021 has brought about significant changes in banking and financial services regulation. 

More regulation is being sought in the ESG and crypto assets spaces and this will take time to fully implement. 

The SARB’s plans to establish a domestic card scheme will better serve the market segment of consumers who do not bank.

The FSCA is making slow but steady progress in considering and granting ODP licence approvals.