MPs object SA bank law in light of Cyprus bailout crisis
The clause concerned removes the need for written consent from the head of a bank for it to be placed in curatorship.
The Bill states that if a bank's ability to repay deposits come into question, the governor of the Reserve Bank may appoint a curator after simply notifying the chief executive or the chairperson of the bank in writing.
DA finance spokesperson Tim Harris said this may be unwise, because confidence in the banking sector was built in part on its perceived independence.
This was underscored by the reaction to Cyprus's unprecedented plans to place a once-off levy on savings accounts.
"Certainly that might raise an issue with the banking sector about the strength and powers of individual banks," Harris told treasury officials who briefed Parliament's portfolio committee on finance on the Bill.
"You only have to look at what happened yesterday when the government of Cyprus took a decision to take a chunk out of every depositor's deposit and was able to do that through whatever legislation they have there.
"That has raised serious concerns in Europe about the strength of individual banks. The action by governments in Europe raises questions about whether this is the right direction to go."
SA consumers at risk
Michael Blackbeard, the deputy registrar of banks at the Reserve Bank, responded that the World Bank and the International Monetary Fund (IMF) had for years warned that with the law as it stood, South African consumers would be at risk if a defaulting bank were to refuse intervention.
Roy Haveman, Treasury's chief director for financial markets, said the situation government was trying to address bore little resemblance to Cyprus' response to its sovereign debt crisis.
"The issue is not to give the minister or the registrar more powers, it is merely to ensure that the process runs a lot smoother and that we get to curatorship in the unlikely event of one of our banks running into trouble quicker," Haveman said.
"I think that's been one of the lessons of the crisis: that you don't actually want to get to the point where your bank is in so much trouble that you have to nationalise."
He said the aim of curatorship was to enable a bank in distress to meet its obligations to its depositors, and to provide additional liquidity to ensure that it continues to function.
"This is quite an important thing to do as soon as possible. And what will often happen is that this will be something that the management of the bank will not want you to do for obvious reasons, particularly if the management has run the bank very badly."
The controversial levy
Haveman said by contrast, banks in the European Union were deeply embroiled in the debt crisis that had affected successive member states and prompted Cyprus' €10-billion bailout, which included the controversial levy.
"There is a terrible interplay, or circle of violence, between how the deterioration in the last five or seven years of sovereign finances have impacted on the balance sheets of the banks."
The Bill has been tabled as part of treasury's policy to review all major finance legislation every five years, and informed by the Basel process on banking supervision, assessments by the IMF and World Bank, and lessons from the global financial crisis.
It also seeks to impose new rules on bankers' bonuses. This too has been a contentious issue in Europe with heads of state, notably former French president Nicolas Sarkozy, urging a curb as part of financial sector reform.
Haveman said it was common cause that bankers liked to take risks and make money. "So basically you get a big bonus if you give out a risky loan."
The Bill establishes a remuneration committee. – Sapa