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The PA will only authorise qualifying applicants with the capacity and commitment to conduct the business of a bank with integrity, prudence and competence on a continuing basis.
The business of a bank, as defined in the Banks Act 94 of 1990 (Banks Act), includes the soliciting or advertising for, or the acceptance of, deposits from the general public.
A deposit is defined as an amount of money paid by one person or institution to another, subject to an agreement in terms of which an equal amount or any part thereof will be repaid on demand, on a specified or unspecified date, or in circumstances agreed upon between the parties involved. In order to conduct the business of a bank in South Africa, an entity must be registered as a bank by the PA. It is an offence to conduct the business of a bank in the Republic without being licensed as a bank.
Banking in South Africa is regulated by wide-ranging primary and secondary or subordinate legislation. The primary pieces of legislation governing deposit-taking institutions are the Banks Act, the Financial Sector Regulation Act 9 of 2017, the Mutual Banks Act 124 of 1993, the Co-operative Banks Act 40 of 2007, and the Co-operatives Act 14 of 2005. Secondary legislation includes prudential and joint standards, regulations relating to banks, regulations relating to cooperative banks, regulations relating to mutual banks, and directives, circulars and guidance notes.
Exemptions to the Banks Act have been granted in respect of certain banks, stokvels, and specific savings and credit groups with a common bond. There are conditions attached to such exemptions.
The PA’s approach to the regulation and supervision of the domestic banking system is also informed by the following legislation:
A commercial bank is a public company owned by its shareholders who are not necessarily depositors or customers of the bank, or a state-owned company.
The Banks Act only allows public companies incorporated and registered under the Companies Act 71 of 2008 (Companies Act) or a state-owned company to conduct the business of a bank in the Republic. An entity seeking authority to carry on the business of a bank in the Republic should apply in writing to the PA, in accordance with section 12 of the Banks Act. An application and every document lodged in terms of an application should be signed by the chairperson or the chief executive officer of the institution.
Subsequently, an applicant to whom the PA granted authorisation for the establishment of a bank may, at any time during the 12-month period commencing from the date of the granting of the authorisation, apply in writing to the PA for the registration of the institution as a bank, in accordance with section 16 of the Banks Act. Similarly, an application and every document lodged in terms of an application should be signed by the chairperson or the chief executive officer of the institution.
In order to be licensed as a commercial bank, the applicant should, among other requirements, meet the R250 million minimum capital requirement.
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A mutual bank is a juristic person and is, in essence, owned by its depositors who qualify as members by virtue of them being shareholders in that juristic person and who are entitled to participate in the exercise of control in a general meeting of that mutual bank.
Mutual banks obtain their legal personality from the Mutual Banks Act and are not required to be incorporated as a company under the Companies Act.
An applicant seeking authorisation to establish a mutual bank should apply in writing to the PA, in accordance with section 10 of the Mutual Banks Act. An application and every document lodged in terms of that application should be signed by the chairperson or the chief executive officer of the institution.
An applicant to whom the PA granted authorisation for the establishment of a mutual bank may, at any time during the 12-month period commencing from the date of the granting of the authorisation, apply in writing to the PA to register the institution as a mutual bank, in accordance with section 13 of the Mutual Banks Act. Similarly, an application and every document lodged in terms of that application should be signed by the chairperson or the chief executive officer of the institution.
In addition to the R10 million minimum capital requirement and the other licensing requirements reflected above, all applications for mutual banks are assessed in terms of the mutuality principle.
These criteria represent the minimum requirements that an applicant will need to meet for authorisation or registration under the Mutual Banks Act. Depending on the circumstances, the PA may refuse an application on other prudential grounds not specifically listed above.
A co-operative bank is an autonomous association of persons united voluntarily to meet their common economic and social needs and aspirations through a jointly owned and democratically controlled enterprise organised and operated on co-operative principles whose members:
For an applicant to be registered as a co-operative bank, the applicant must first be registered as a co-operative financial institution with 200 or more members and holding members’ deposits of R5 million or more. Applications must be submitted (and are assessed) in accordance with the form, content and criteria prescribed in terms of the Co-operative Banks Act.
When processing a licence application for a co-operative bank, the PA also considers the provisions of the Co-operatives Act.
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A co-operative financial institution (CFI) is a co-operative that takes deposits and usually identifies itself as a Financial Co-operative, Financial Services Co-operative, Credit Union or Savings and Credit Co-operative.
The Financial Sector Regulation Act 2017 amends the Co-operatives Banks Act 2007 to include the supervision and regulation of CFIs within the PA. Chapter VIIA provides for the registration of CFIs, requirements for registration, suspension of registration or de-registration, repayment of deposits on deregistration or lapsing of registration, and winding up or judicial management of CFIs.
For an applicant to be registered as a CFI, the applicant must be registered as a co-operative with 200 or more members and share capital of R100 000. The CFI must also satisfy human, financial and operational requirements.
On the date that Chapter VIIA took effect, CFIs had to apply to the PA for registration. CFIs were previously registered and supervised by the Co-operative Banks Development Agency (CBDA). CFIs currently registered with the CBDA will have a period of 12 months to register as a CFI in terms of the Co-operatives Banks Act or prior to the expiration of the certificate they currently hold.
When processing a licence application for a CFI, the PA also considers the provisions of the Co-operatives Act.
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