FSB全球金融稳定委员会-Peer-Review-of-South-Africa_39页_706kb

Peer Review Summary of South Africa

Core Content

The Peer Review of South Africa conducted by the Financial Stability Board (FSB) in 2019 evaluates the implementation of the bank resolution framework and the deposit insurance framework (DIS). The review is based on responses from South African financial authorities, consultations with stakeholders, and discussions in the FSB's Standing Committee on Standards Implementation (SCSI). It aims to assess how well South Africa aligns with international standards and recommendations, particularly from the FSAP and G20/FSB commitments.

Main Findings

• Good progress has been made in implementing reforms for both bank resolution and deposit insurance.
• The bank resolution framework is being reformed through the Financial Sector Laws Amendment Bill (FSLAB), which proposes to make the South African Reserve Bank (SARB) the sole resolution authority.
• The deposit insurance framework is still in the development phase, with the establishment of the Corporation of Deposit Insurance (CoDI) being a key part of the reform.
• There is a need to enhance the credibility and effectiveness of both frameworks through clear implementation plans, stronger institutional capacity, and improved coordination.

Key Areas of Focus

1. Framework for Resolution of Banks

Background

• South Africa's banking sector is large and concentrated, with the top six banks holding over 92% of sector assets.
• These banks are systemically important (SIFIs) and have cross-border operations in several African countries.
• The current resolution mechanism involves curatorship (for commercial and mutual banks) and liquidation (for cooperative banks).

Progress and Challenges

• The FSAP 2014 highlighted the need for a more robust resolution framework, especially for SIFIs.
• The FSLAB is a key legislative initiative to overhaul the resolution framework, including:
  • Establishing SARB as the sole resolution authority.
  • Introducing loss-absorbing capacity (LAC) and additional tier 1 (AT1) capital instruments.
  • Creating a new subordinated class of loss-absorbing instruments (FLAC) to facilitate bail-in powers.

Recommendations

• Develop a clear implementation roadmap for the resolution framework, including timelines, resource allocation, and policy sequencing.
• Enhance SARB’s resolution function by ensuring a dedicated resolution division, a clear mandate for the Resolution Planning Panel (RPP), and strong coordination with other financial regulators.
• Review and update emergency liquidity arrangements (ELA) to align with the new resolution framework.
• Introduce a mechanism for ex post recovery of public funds used in resolution processes.

2. Deposit Insurance Framework

Background

• South Africa is the only FSB jurisdiction without an explicit deposit insurance framework.
• The FSLAB includes provisions for the establishment of CoDI, which will manage deposit insurance functions.
• The IADI Core Principles are being followed in the design of the DIS.

Progress and Challenges

• The proposed coverage limit is R100,000 per depositor per bank, which would fully cover 98% of retail depositors and 83% of SMEs.
• The design of the DIS includes:
  • Compulsory membership for all deposit-taking institutions.
  • Single customer view (SCV) to accurately assess depositors and calculate premiums.
  • A multi-tiered funding structure, including an equity tranche (0.20% of covered deposits), a liquidity tranche (3% of covered deposits), and an annual levy for operational costs.
• The liquidity tranche is a unique feature compared to international practice, raising concerns about its effectiveness in case of bank failure.

Recommendations

• Firm up the timeline and resource plan for establishing CoDI, and clearly state its objectives in legislation.
• Implement an extensive public awareness campaign to inform depositors about the DIS, starting once FSLAB is promulgated.
• Periodically review the design features of the DIS to ensure coverage for all deposit-taking institutions and that limits remain appropriate.
• Gradually build up the equity tranche and determine a long-term target fund size to enhance the credibility of the DIS.

Key Information

• FSB peer reviews are part of the FSB Framework for Strengthening Adherence to International Standards, and South Africa volunteered for its second review in 2019.
• The FSAP 2014 identified several challenges, including high household indebtedness, reliance on money market funds, and systemic risks from interconnectedness.
• The FSLAB is central to both the resolution and deposit insurance reforms, with SARB playing a key role in its implementation.
• CoDI is expected to enhance the financial safety net and reduce the need for taxpayer bailouts.
• The FSB recommends that South Africa should align its frameworks with international standards to ensure financial stability and systemic risk mitigation.

Conclusion

The peer review highlights that while South Africa has made significant progress in reforming its bank resolution and deposit insurance frameworks, further steps are needed to ensure effective implementation and public confidence. The recommendations focus on institutional capacity, legal clarity, funding structure, and public communication. These efforts are critical to addressing the too-big-to-fail issue and strengthening the financial safety net in the country.