SA to implement financial services reforms

South Africa will implement financial regulatory reforms in line with G-20 recommendations, including better management of foreign risk exposure of banks and institutional investors, the National Treasury said (see box below).

“As of March 2010, South African banks will be able to acquire direct and indirect foreign exposure of up to 25% of their total liabilities (excluding equity), covering all foreign exposure but excluding FDI (foreign direct investment).

“The initial limit of 40% has been adjusted downwards in light of recent international developments,” the Treasury said in its 2010 Budget Review (chap 2).

It said research was underway to complete the move from rules-based to principles-based regulation of foreign exposure for institutional investors and to finalise the definition of ’foreign asset’ that captures the underlying risks.


The Treasury said it would consult on these matters during 2010. The existing inward listing policy and definition of foreign assets for companies remained in place for now.

Appropriately mandated private equity funds would be able to obtain upfront approval from the Reserve Bank for investments in Africa for up to one year.

Central bank Governor Gill Marcus told reporters at a briefing: “It’s not as if there’s going to be a big bang to regulation that suddenly needs to be addressed here.

“One of the lessons that is very clear is that central banks need to have much closer understanding of the working of the banking system, the systemic issues that prevail as well as the products,” she said.

The Treasury also said amendments to Regulation 28, which limits the amount private pension funds can invest in certain assets, will be released for public comment. That will include changes to incentives for investing in Africa.

Source: Sowetan