The South African Reserve Bank published its final annual bank supervision report today which will hence forth be produced by the Prudential Authority (PA). The PA, launched on the 1st of April 2018, forms part of the “Twin Peaks” model and is responsible for regulating banks, cooperative financial institutions, insures, financial conglomerates and certain market infrastructure. Kuben Naidoo, Deputy governor and CEO of the PA presented the report highlighting the significance of the review period which was marked by the issuance of new commercial banking licences to TymeDigital and Discovery Bank and a cooperative banking licence to Ziphakamise Cooperative Bank. When asked about the South African Post Office, Naidoo maintained that although the banks Act states that only public companies may apply for a banking licence, he feels it is necessary for the post office to be granted a licence so that it can also be regulated. The mandate of the Bank Supervision Department is to promote the safety and soundness of the banking system. For it to achieve this, all financial institutions that receive deposits must be licensed.
According to the report, total banking sector assets increased from R4 877 billion in December 2016 to R5 157 billion at the end of 2017. Gross loans and advances grew by 2.54% in 2017, a decline compared to the 2.98% recorded in December 2016. Total capital adequacy ratio (calculated using the aggregate amount of qualifying capital and reserve funds divided by Risk Weighted Assets) increased from 15.93% in December 2016 to 16.22% December last year. Liquidity coverage ratio was recorded at 119.02% in December 2017 and impaired advances amounted to R108 billion.
Total asset Structure of the South African Banking sector
Administrative sanctions for AML (anti-money laundering)/CFT (combating the financing of terrorism) non compliance had a combined value of R77.5 million. These include a R75 million penalty imposed on China Construction Bank Corporation (Johannesburg Branch) for, amongst other things, “Inadequate controls and working methods pertaining to the reporting of suspicious and unusual transactions”. VBS Mutual bank, yes the same bank that gave former president Jacob Zuma a R7.9 million loan to “Pay back the money” and is now under curatorship, was fined R2.5 million for non-compliance. However the report states that “the decision to impose administrative sanctions was not based on any evidence that China Construction Bank Corporation-Johannesburg Branch or VBS Mutual Bank had facilitated transactions relating to money laundering and/or the financing of terrorism”.
For the full report, visit www.resbank.co.za