On 24 August 2018, the National Treasury issued the draft Financial Matters Amendment Bill, 2018 (the draft Bill).
The draft Bill contains a few proposals including one to amend the Banks Act 94 of 1990 (the Banks Act) to enable qualifying state-owned companies (SOCs) to apply for banking licences, subject to executive approval.
Currently, the Banks Act only allows for public companies to establish a bank. In terms of the Companies Act 71 of 2008 (the Companies Act), SOCs are not considered to be public companies.
The draft Bill proposes amendments to Sections 1 and 12 of the Banks Act, which will:
- regard SOCs as public companies for the application of the Banks Act by including “a state-owned company contemplated in section 1 of the Companies Act” in the definition of a “public company”;
- determine prerequisites for a SOC and a SOC’s holding company to qualify to apply to be established as a bank, namely that:
- a SOC must first obtain the approval of the Minister of Finance, acting with the concurrence of the Minister responsible for the SOC, to apply for authorisation to establish a bank; and
- the application must include a declaration by the auditor of the SOC certifying that for the period of 24 months immediately preceding the application, the assets of the company, its holding company and (if applicable) the holding company of its holding company, exceeded its liabilities; and
- provide that, except for the Financial Sector Regulation Act 9 of 2017, the Banks Act shall prevail where the Banks Act is inconsistent with other legislation applying to qualifying SOCs (i.e. the Companies Act and the Public Finance Management Act 1 of 1999).
A copy of the draft Bill and the memorandum on its objects can be accessed on the National Treasury’s website. Comments can be emailed directly to [email protected] before 14 September 2018.
Banks Amendment Bill
In May 2018, a private members’ bill, namely the Banks Amendment Bill, 2018 (Private Member’s Bill), was proposed by a Member of Parliament, Mr N. F. Shivambu. The Private Members’ Bill seeks to permit SOCs to register and conduct the business of a bank.
Therefore, because of the overlap between the proposed amendments to the Banks Act, we expect that either the draft Bill or the Private Members’ Bill will be adopted, but not both.
There are public hearings on the Private Members’ Bill in Parliament scheduled for tomorrow, 4 September 2018.
You are welcome to contact Kirsten Kern or Bright Tibane from our Banking and Financial Services Regulatory Practice for assistance with further analysis and comments relating to either the draft Bill or the Private Members’ Bill.
