Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Bulk of amendments

• “his”, “him”, “himself”, “chairman”, “he”

• Gender neutral – “person” to “him/her”, “his/her”

Gender Sensitivity

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Exchequer Act - Public Finance Management Act, 1999

- “liquid assets” : securities ito PFM “to fund the National Government”

• Inspection of Financial Institutions Act, 1998 (1984)

- sections 6, 69, 84

Amended Legislation

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Regulations relating to branches

- sections 1 & 18A

• DI020 – Registrar to require “at any time”

- section 1(1A) – not only with new appointment

• Circulars – also for distribution of information

- section 6(4)

• Due diligence at expense of bank

- section 7

Existing Practices

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Regulations relating to banks

- sections 12, 16 & 43

• Revocation of authorisation – 6 months (12 months)

- section 14 (section 16)

• Name “bank” – also divisions, brands & products

- sections 22(1) & 22(5) include branches/rep offices

• Illegal deposit-taking by persons not registered as a bank

- section 81 – include branches

Existing Practices (cont.)

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Supreme Court – High Court

- sections 25, 28, 37(5), 54(8) & 81(1)

Amended Names

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Consultation with Competition Commission (37(2)(b))

- Competition Act concurrent jurisdiction (“may” consult)

• Parliamentary procedure to amend Companies Act

- section 51(3)

Deletions

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Certain non-bank investments by controlling companies

• not to exceed 40% of share capital & reserves

• of bank and controlling company on a consolidated basis

• as prescribed by regulation

Section 50 – Controlling Company Investments

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Enabling regulations relating to representative offices

- section 34

• Enabling compliance function

- section 60A

• Enabling corporate governance

- sections 1 and 60B

Subordinated Legislation

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Compliance function - section 60A

- bank shall establish independent compliance function

- headed by compliance officer

- perform function with reasonable care and skill

- Registrar may set requirements in regulations

Subordinated Legislation (cont.)

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Corporate Governance - section 1

- irt management of a bank/controlling company

- includes all structures, processes, policies, systems &

procedures

- whereby bank/controlling company is governed.

Subordinated Legislation (cont.)

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Corporate Governance - section 60B

- officers establish and maintain

- adequate & effective process of corporate governance

- consistent with nature, complexity and risks inherent in bank

- Registrar may set requirements in regulations

Subordinated Legislation (cont.)

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• “officers” = directors, CEO, executive officers & secretary

• officers owe fiduciary duty and duty of care & skill to bank

- act bona fide for benefit of bank

- avoid conflict of interests

- possess knowledge and skill reasonably expected

- exercise care in carrying out functions

Section 60 – Duties of Directors

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Registrar may institute action ito section 424 Companies Act

- against officers knowingly carrying on reckless business

- amount recovered applied:

- expenses incurred by Registrar

- off-set amounts paid by Registrar or DIS

- pro rata payment of losses of depositors

Section 60 – Legal Action by Registrar

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Non-executive directors

- bank gives Registrar written notice of nomination & DI020

- 30 days prior to appointment

- Registrar may object to chairperson within 20 days

- bank shall not appoint / appointment has no legal effect

- disputes settled by arbitration – section 60(6)

Section 60 – Appointment of Officers

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Executive officers

- bank gives Registrar written notice of appointment & DI020

- Registrar may object to chairperson within 20 days

- appointment terminated within 14 days

- disputes settled by arbitration – section 60(6)

Section 60 – Appointment of Officers

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Registrar may terminate appointment of current officers

- if he has reason to believe

- officer is no longer fit & proper

- or not in public interest to continue with appointment

Section 60 – Current Officers

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Registrar notifies officer concerned also CEO and chairperson

• Officer concerned - written response within 14 days

• Registrar gives decision in writing within 14 days thereafter

• Disputes referred to AFSA for arbitration

• Arbitrator confirms termination and termination = immediate

or does not confirm termination and appointment continues

• Arbitrator’s finding is final and not subject to section 9 review

Section 60(6) – Procedure

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Registrar approves auditor of bank & controlling company

• Appointment shall be for period and on conditions as as

prescribed

• Grounds for refusal or withdrawal of approval

Section 61 – Appointment of Auditors

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Further functions may be prescribed by regulation

Section 64 – Audit Committee

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Board to appoint at least 3 members (2 non-executive)

to Risk Committee

Functions (to assist board):

- to evaluate adequacy/efficiency of risk policies, practices

- to identify build up/concentration of risks

- to develop risk mitigation strategy

- to ensure annual risk assessment is undertaken

- to regularly monitor all key risks/performance indicators

- facilitate and promote communication on above matters

- establish independent risk management function/training

- further functions as prescribed by Regulations

Section 64A – Risk Committee

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Consist of ALL non-executive directors• Functions (to assist board):

- to evaluate adequacy/efficiency of corporate governance

- to maintain board continuity programme

- performance/succession planning

- regular review of mix of skills & experience

- annual self assessment of board

- nomination of successors to board

- terminate appointment of delinquent directors

- ensure compliance with laws, regs, codes & practises

- further functions as prescribed by Regulations

Section 64B – Corporate Governance Committee

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Sections 70(2)(a)(ii) & 70(2B)(a)(ii)(aa)

- delete (1)(a)(ii) in reference to section 75

• Section 73(1)(b)

- insert “relating to any private sector non-bank person”

• Section 76

- insert “of any company” after the word “shares”

Clarifications

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Restriction of investments in debentures etc by banks

• Limited to 10% of amount prescribed by Regulations

Section 77 – Restricted Investments

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Banks shall not lend money against security of own shares

• Or against security of controlling company shares

Section 78(1)(b) – Undesirable Practices

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Bank shall not pay out dividends from share capital

• Without prior written approval of Registrar

Section 78(1)(k) – Undesirable Practice

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• Costs of inspectors and fund managers

• Relating to inspection of unregistered persons

• Remuneration as determined by Registrar

• Registrar may recover cost from person inspected

Section 84(6) – Recovery of Costs of Inspection

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• R100 000 and/or 5 years to fine in court’s discretion

and/or 10 years

• R10 000 and/or 6 months to R100 000 in court’s discretion

and or 5 years

• Fines for late returns R100 to R1000 for every day

Section 91 – Increased Penalties

Banks Act Amendment Bill, 2003Banks Act Amendment Bill, 2003

• If any person submits return, statement, report etc

• to Registrar in terms of the Act

• and information is incorrect or inaccurate

• Registrar may impose a fine of R1000 per day

• that the return etc is not revised, corrected or resubmitted

Section 91(6A) – Incorrect Information