General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
July 06, 2017

IMF published its staff report in the context of the 2017 Article IV Consultation with South Africa. The report highlights that the banking sector is well-capitalized and highly profitable, partly owing to high concentration and pricing power, including sizable fees for financial services. Moreover, major performance indicators in the banking sector broadly improved in 2017, largely because of higher interest income.

The staff report reveals that authorities have made progress in implementing the 2014 IMF FSAP recommendations, particularly on modernizing the macro-prudential framework, including the introduction of “Twin Peaks” and resolution regimes. These reforms will likely increase financial stability by removing regulatory gaps and reducing implicit contingent liabilities from the banking sector. Capital ratios (both risk-weighted and unweighted) increased, with the tier 1 capital ratio at 14.6% in April 2017, well above regulatory requirements. The non-performing loan ratio (NPL) declined to 2.4% in April 2017 from 3.1% in 2015 and 2.9% in 2016. Banks’ profitability improved as the rise in interest rates was transmitted more rapidly to their lending rates than to their deposit rates. The banking sector’s resilience to the sluggish macro-economy stems from the sector’s conservative management, which focuses lending on less risky/higher net worth firms and individuals.

 

The Financial Sector Regulation bill to execute the Twin Peaks reform is likely to be approved and implemented in 2017 and the Designated Institutions Resolution bill to introduce the new resolution regime is expected to be submitted to parliament in late 2017. In this context, National Treasury and the South African Reserve Bank (SARB) published for public comment a policy document on an explicit, privately-funded deposit insurance scheme. The SARB is also working toward an enhanced macro-prudential framework, including the addition of new tools such as countercyclical capital buffers, sectoral capital requirements, dynamic provisioning, and leverage and liquidity ratios. The third draft on the OTC derivative regulatory framework will be reviewed by National Treasury and the SARB in 2017. However, limited progress has been made on the reform of collective investment schemes, promotion of fair competition and financial inclusion, and better consumer protection.

 

The high degree of concentration in the banking sector provides stability but also has downsides, such as a tendency for “too-big-to-fail” situations and greater risk of contagion. This tradeoff can be managed through a combination of effective prudential regulations and the oversight of competition authorities. In addition, the authorities were analyzing possible ways of moving toward a tiered banking system allowing for mid-sized banks with proportionally less stringent regulatory requirements. The authorities are exploring ways to improve availability of credit information, establish viable risk-sharing schemes, extend the asset classes that can practically be used as collateral, and promote fintech. Subject to the passage of the Financial Sector Regulation Bill, the Financial Sector Conduct Authority and Ombud Council will be established in 2017 to ensure a fairer and more effective financial sector. Additionally, fintech regulatory framework (part of the Conduct of Financial Institutions Bill) could include a “regulatory sandbox” to encourage innovation within a controlled environment while managing any potential risks.

 

Related Link: Staff Report (PDF)

Keywords: IMF, Africa, South Africa, Article IV, Banking, Macroprudential Framework, NPL, Resolution

Related Articles
News

BCBS Publishes Results of Survey on Proportionality in Bank Regulation

BCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision.

March 19, 2019 WebPage Regulatory News
News

US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy Swaps

US Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule.

March 19, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Third Update for March 2019

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

March 15, 2019 WebPage Regulatory News
News

OCC Updates Recovery Planning Booklet of the Comptroller's Handbook

OCC updated the Recovery Planning booklet of the Comptroller’s Handbook.

March 15, 2019 WebPage Regulatory News
News

EBA Publishes Report on Convergence of Supervisory Practices Across EU

EBA published annual report on the convergence of supervisory practices in EU.

March 14, 2019 WebPage Regulatory News
News

CPMI-IOSCO Publish Update to Level 1 Assessment of PFMI Implementation

CPMI and IOSCO jointly updated the Level 1 Assessment Online Tracker on monitoring of the implementation of the Principles for financial market infrastructures (PFMI).

March 14, 2019 WebPage Regulatory News
News

Agustín Carstens of BIS Speaks About New Role of Central Banks

While speaking at the 20th anniversary conference of the Financial Stability Institute (FSI), Agustín Carstens, the General Manager of BIS, highlighted the need for regulatory actions in light of the continued evolution of financial technology.

March 14, 2019 WebPage Regulatory News
News

ESMA Analyzes Impact of Regtech and Suptech for Markets and Regulators

ESMA published the results of its analysis of the regulatory and supervisory technologies—also known as regtech and suptech—being developed in response to various demand and supply drivers in the financial sector.

March 14, 2019 WebPage Regulatory News
News

PRA Publishes Policy Statement on Group Supervision Under Solvency II

PRA published a policy statement (PS9/19) that provides feedback on responses to the consultation paper CP15/18 and the final supervisory statement SS9/15 (Appendix) on group supervision under Solvency II.

March 14, 2019 WebPage Regulatory News
News

ECB Announces Start Date for Euro Short-Term Rate

ECB announced that it will start publishing the euro short-term rate (€STR) as of October 02, 2019, reflecting the trading activity of October 01, 2019.

March 14, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2759