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    SARB Issues Directive on Principles for Operational Resilience

    December 14, 2021

    The South African Reserve Bank (SARB) published a Directive on the principles for operational resilience. This publication directs banks to assess the adequacy and robustness of their operational resilience policies, processes, and practices against the best practices in the Basel Committee on Banking Supervision (BCBS) principles for operational resilience. All banks must comply with the respective requirements in this Directive within 18 months of the publication date, which is December 14, 2021. A proposed Directive has also been published on the requirements "for conducting the business" of a representative office of a foreign banking institution operating in South Africa and of a representative office of a South African bank operating outside South Africa. SARB is requesting comments on the draft until January 31, 2022.

    The Directive on operational resilience highlights that banks must assess the adequacy and robustness of their current policies, processes, and practices against the principles for operational resilience issued by the BCBS. All operational resilience controls implemented by the bank must follow a risk-based approach that is aligned with the risk appetite, based on the nature, size, and complexity of a bank's operations. Banks must ensure that all principles in the BCBS paper are addressed either through internal resources or by means of outsourcing/third-party agreements without undue delay. Existing risk management frameworks, business continuity plans and third-party dependency management must be implemented consistently within the bank.

    The proposed Directive on "requirements for conducting business" intends to inform the chief representative officers of their responsibility to report annually, to the Prudential Authority, on the adequacy and effectiveness of internal controls of the representative office. Should the chief representative officer be the only employee of a representative office, the international division of the head office of the representative office will be responsible for furnishing the Prudential Authority with the aforementioned information. A secondary purpose of this proposed Directive is to inform the chief representative officers of representative offices of foreign banking institutions operating in South Africa of their responsibility to report any change to the information originally submitted to the Prudential Authority in the forms RO 003 and RO 004 prescribed in Annexures C and D to the Regulations related to representative offices of foreign banking institutions. The chief representative officer, or the international division, shall provide internal control report annually, by not later than January 31 of each year in the case of a representative office of a foreign banking institution operating in South Africa and not later than 120 days after the end of the financial year of the institution of which it is a representative office, in the case of a representative office of a South African banking institution operating outside South Africa.

     

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    Keywords: Middle East and Africa, South Africa, Banking, Operational Resilience, Operational Risk, Governance, Reporting, Basel, Internal Controls, BCBS, SARB

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