Featured Product

    SARB Announces Activation of Loan Guarantee Scheme Amid COVID Crisis

    May 12, 2020

    SARB announced that the COVID-19 loan guarantee scheme announced by President Cyril Ramaphosa in April will operate from May 12, 2020. The initial set of participating banks—which includes Absa, First National Bank, Investec, Mercantile Bank, Nedbank, and Standard Bank—are ready to accept loan applications from eligible businesses which bank with them. The activation of the loan guarantee scheme follows the finalization of legal details by National Treasury, SARB, and the Banking Association South Africa. SARB is the administrator of the scheme. SARB also published a set of frequently asked questions (FAQs) about the loan guarantee scheme.

    All commercial banks can access the guarantee scheme, though SARB reserves the right to limit the amount that can be accessed by an individual bank. The loan guarantee scheme is an initiative to provide loans, guaranteed by government, to eligible businesses with an annual turnover of less than ZAR 300 million to meet some of their operational expenses. Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, and contracts with suppliers. Government and commercial banks will be sharing the risks of these loans. Initially, the National Treasury has provided a guarantee of ZAR 100 billion to this scheme, with the option to increase the guarantee to ZAR 200 billion if necessary and if the scheme is deemed successful. SARB takes no financial risk in the scheme as its loans to banks are guaranteed by the National Treasury. Losses will be allocated as follows:

    • The net margin on the loan portfolio (approximately 2 percentage points) is pooled as the first loss buffer.
    • The 0.5 percentage point credit premium charged by the National Treasury is the second loss buffer.
    • Banks will take the third loss, up to 6 percentage points of the amount loaned by that particular bank in terms of the scheme.
    • After that, losses will be borne by the National Treasury.

    As an administrator of the scheme, SARB will provide the finances for these loans to banks and will keep a record of the amounts owing by each bank as well as default rates. SARB will publish an annual report setting out how much each bank has used from the scheme and the performance (default rate) the COVID-19 loan portfolio of each bank. 

     

    Related Links

    Keywords: Middle East and Africa, South Africa, Banking, COVID-19, Loan Guarantee, Credit Risk, FAQ, SRB

    Featured Experts
    Related Articles
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2

    PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Reduce Impact of Large Bank Failures

    US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule on Net Stable Funding Ratio Requirements

    US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.

    October 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6004