/ 1 January 2002

Central bank against plan for a super-regulator

South African Reserve Bank governor Tito Mboweni said on Tuesday he opposed the government’s plans for a single financial regulator, fuelling speculation of a rift with the Treasury over the issue.

Finance Minister Trevor Manuel has repeatedly said that he wants to set up a single, super-regulator to take over the function, currently divided between the Registrar of Banks at the central bank and the Financial Services Board, which regulates insurance companies and stock market.

”Coal-face experience indicates that South Africa is not ready for a single regulator,” Mboweni told reporters at an annual general meeting of the central bank.

Manuel has given no deadline for a single regulator, but has made clear that combining the two bodies is still on the agenda. His representative, Logan Wort, said on Tuesday the minister had ”taken note” of the views of the central bank.

Banking sources say the Treasury was also considering having the new combined regulator outside the central bank — an idea which Mboweni rejected outright on Tuesday.

”When a bank is in distress it’s clear to us that the presence of banking supervision in the central bank makes things much more efficient and easy to deal with,” he told reporters.

Several small South African banks have either collapsed or been taken over in the past 18 months as a result of runs on deposits fuelled in part by concerns over liquidity and banks’ exposure to the risky low income market.

”Despite these developments over the past year, South Africa’s banking system remains sound,” Mboweni said in a address prepared for the Reserve Bank’s annual general meeting.

He told reporters he believed there could be better co-ordination between the existing regulators. But if there were three parties trying to deal with regulation — the Treasury, the central bank and a single regulator — there would be ”enormous difficulties,” he added.

In reply to a reporter’s question, the governor denied that he was on a ”collision course” with the finance minister.

”The minister of finance has expressed his views on the matter — there is nothing untoward on the side of the central bank expressing its views,” he said.

PLANS FOR NEW BANKING LAWS

Since the start of 2002, two of South Africa’s smaller banks have announced plans to give back their licences, while two medium-sized banks have been bought out following damaging deposit runs.

Mboweni noted that steps had been taken to introduce legislation that would deal with management deficiencies in banks by providing for the removal of those who were not considered fit.

There have also been proposals for a deposit insurance scheme to protect small depositors from losses if a bank failed. Membership would be compulsory for all registered banks and financial institutions.

Mboweni said that the central bank was also aware of the need to broaden the access of individuals and small and medium-sized enterprises to basic banking services and funding.

More than half of South Africa’s population of

43-million do not have a bank account.

In the past, the approach was to encourage registered banks to provide such services and to exempt non-banks from banking laws, Mboweni said.

”Work is now in progress to reform the Mutual Banks Act by making provision for different classes of banks. This would create a more appropriate regulatory framework and give broader access to finance,” he said. – Reuters