South African Finance Minister Trevor Manuel said laws to ensure that financial institutions invested money fairly were necessary but would not be forced on the country without consultation.
There has been a great deal of trepidation in financial circles about the so-called ”Community Re-Investment Legislation” — which the government says it wants to introduce as part of efforts to help the country’s poor black majority.
”We certainly don’t want to beat up anyone to come onside with the legislation,” Manuel told members of the South African Insurance Association, in reply to a question from a reporter.
”In an optimal world, everything would be done by self-regulation, but South Africa is not an optimal world…the bulk of people are still living in poverty and can’t get access (to banks, credit).”
It is unclear what the laws will require of banks and other financial institutions, which have been rattled this year by damaging deposit runs on small firms seen as vulnerable to credit problems in the high-risk, small loans sector.
Over half the country’s population of around 43-million are thought not to have a bank account, and the government has been encouraging big firms to push further into the mass market to give poor people a chance to set up their own businesses.
Manuel said the government was keen to collaborate with the banking industry on the new legislation.
”The Banking Council is talking to us but are not yet onside on this issue…I would like to see us being able to do this collaboratively,” he said. The Banking Council is an independent industry body.
Manuel said it was also important to improve the regulatory environment. Laws to protect consumers of financial products would be submitted to the National Council of Provinces — the lower house of parliament — in August and President Thabo Mbeki would likely consent to it soon afterwards, he said.
Improvements in the sector would also hinge on how quickly he managed to get a single financial regulator ”up and running”.
Manuel has said he wants to introduce a single financial regulator, but repeatedly declined to speculate on a time-frame after missing an original goal of July 2002.
”There’s a lot of work we have to do,” he said.
He told the gathering he also intended to strengthen the country’s Financial Services Board, which regulates financial services outside the banking sector. Banks are regulated by the Registrar of Banks at the central bank. – Reuters