United Kingdom banking group Barclays confirmed on Monday that it was still awaiting regulatory approval to acquire a controlling stake in South Africa’s biggest retail bank, Absa.
Regulatory approval is only expected to be forthcoming later this month or even next month, due to the December holiday break.
Barclays has indicated that it won’t make a formal offer for Absa until it has the necessary regulatory approval.
Barclays, which pulled out of South Africa at the height of the anti-apartheid sanctions campaign in the mid 1980s, submitted a formal application to the Registrar of Banks on December 1.
After assessing the application, the Registrar of Banks will make recommendations to the Minister of Finance, Trevor Manuel, who has final say over the proposed deal.
In a renewed cautionary notice on Monday, Absa said that discussions with Barclays were progressing, but that timing of the approval process by the regulatory authorities was not known.
While financial institutions are waiting to see whether the government will be prepared to move away from its so-called “four-pillar’ policy of the country’s four biggest banking groups remaining locally controlled, recent remarks by South African Reserve Bank Governor Tito Mboweni are being interpreted by some as a sign that the regulators are likely to give their thumbs-up to the deal and even allow a second foreign bank to buy out one of the local “big four”.
“The world is changing very fast and the regulatory authorities cannot be seen to be standing in the way of globalisation and rapid changes. These changes should be welcome as they are indicative of the increasingly positive outlook for South Africa. The authorities have therefore to face up to the task of anticipating and keeping abreast of changes to meet the new challenges and opportunities of today and tomorrow. ‘Nothing is stable except stability’ and progress is measured by ‘constantly changing when circumstances change’, as the great philosophers of old would have said,” Mboweni remarked recently to the media.
But he says any such deal would have to rest on the four-pillar policy.
Also, each application would have to be examined on a case-by-case basis and the supervisory regime would have to follow the internationally agreed framework of “home-host” banking supervision.
In reference to the latter, he says: “This is already in operation in that South African-owned banks have a presence abroad and internationally-owned banks have a presence in South Africa. The success of such a system relies largely on both the home-country and the host-country regulator ensuring compliance with the Basel Core Principles for Effective Banking Supervision and the various guidelines flowing therefrom.
“In that regard, regulators seek to ensure that their requirements do not obstruct home-country requirements and, consistent with meeting their responsibilities, dovetail as much as possible with those requirements.
“Maintenance of a sound and efficient financial system and an ability to respond to a crisis effectively are crucial prerequisites for a country’s economic and social welfare. Therefore, host-country supervisory arrangements are essential, as are structures for coordinating home and host supervision. Home-country and host-country supervisors should be able to rely on and support one another at all times.
“When banking groups have international shareholders, it is important for the host-country supervisor to be able to rely on the shareholder of reference in times of need,” he adds.
A controlling stake in the South African bank is likely to cost Barclays in excess of R20-billion, making it its biggest and costliest acquisition yet.
Since announcing its intention to acquire a controlling stake in Absa, the latter’s share price has rocketed from around R60 per share to over R72 a share, which compelled Absa recently to issue a cautionary to shareholders that the Barclays’ offer may not be at a premium to its share price. – I-Net Bridge