Draft legislation to tighten banking regulations and ensure banking executives act with skill and care has been tabled in Parliament.
The Banks Amendment Act seeks to provide depositors protection against exploitation by means of reckless, negligent or fraudulent management of the bank.
It will also empower the Registrar of Banks to reject the appointment of a director, chief executive or executive officer who is believed not to be a fit and proper person to hold such position.
”The registrar is, however, required to provide written reasons for his objection, whereupon the appointee has a reasonable period to answer to such reason for the objection,” a memorandum attached to the bill said.
The vast majority of the amendments are technical in nature, or seek to clarify other legislation, although some issues, such as those related to corporate governance, emerge from recent bank failures and the report of the Myburgh Commission into irregularities at Regal Treasury bank.
The memorandum says since banks are seen as special institutions that fulfil a unique role within a modern economy, it is necessary to require a greater degree of care and skills from executive officers.
The definition of executive officers is extended to include company secretaries, compliance officers and executive directors, since they play a pivotal role in a bank’s corporate governance functions.
The registrar will be empowered to take action in terms of the Companies Act against directors, chief executives or other executives who knowingly do not act in the best interests of the bank.
”Furthermore, the proposed amendment makes it clear that the company, as opposed to the shareholders, is the beneficiary of the statutory fiduciary duty and duty of care and skill.”
It will become an offence to refuse to inform the registrar of appointments of senior personnel within banks.
The bill has been referred to Parliament’s finance portfolio committee. – Sapa