Banks Amendment Bill. Presented by: Mark Brits 21 April 2015

Transcription

1 Banks Amendment Bill Presented by: Mark Brits 21 April 2015

2 What is BASA? 1 BASA is the industry representative body of Banks in South Africa Exists to contribute to the enablement of a conducive banking environment, including supporting initiatives for an inclusive economy Work with stakeholders to enable banks role in this Participate at the highest-level of decision making in the country. To this end, The Banking Association South Africa has structured and organised itself to ensure effective participation in and continued contribution to providing input to the National Assembly Be a trusted business advisor Assist with better enabling legislation

3 What is BASA? 2 Inclusive Economy Division Infrastructure Development Human Settlements SMMEs Financial Inclusion Financial Services Charter and Industry BEE Approach Prudential Division Basel Committee on Banking Supervision Regulatory Consistency Assessment Programme Team White Paper on Resolution and Deposit Insurance Framework Net Stable Funding Rations (NT, SARB and ASISA forum) Market Conduct Division Treating Customers Fairly Market Conduct Policy ICT Remote Gambling

4 Membership Overview 3 ABSA Bank Ltd African Bank Ltd Albaraka Bank Ltd Bank of Baroda Bank of China Jhb Branch Bank of Taiwan S A Branch Bidvest Bank Ltd Capitec Bank Ltd China Construction Bank Citibank N.A. Deutsche Bank AG Jhb Branch Finbond Mutual Bank FirstRand Bank Ltd GBS Mutual Bank Grindrod Bank Ltd HBZ Bank Ltd Hong Kong & Shanghai Banking Corp Investec Bank Ltd Ithala Limited JPMorgan Chase Bank Mercantile Bank Ltd Nedbank Ltd Sasfin Bank Ltd Societe Generale Jhb Branch Standard Chartered Bank Jhb State Bank of India The SA Bank of Athens Ltd The Standard Bank of S A Ltd UBank VBS Mutual Bank Habib Overseas Bank Ltd

5 Standards setting bodies Figure 1: International financial architecture driving national implementation 4 G20 the premier forum international economic cooperation Financial Stability Board International Monetary Fund Bank for International Settlements Basel Committee on Banking Supervision International Association of Securities Commissions International Association of Insurance Supervisors International Accounting Standards Board Financial Action Task Force National regulatory framework Bank Supervision Department of the South African Reserve Bank Financial Intelligence Centre Financial Services Board National Credit Regulator Source National Treasury

6 2008 G20 Declaration: Global Financial System Reform 5

7 Financial Stability Board: Policy framework for effective resolution 6

8 International Best Practice International Monetary Fund December 2010 IMF Country Report No. 10/352 South Africa: Report on the Observance of Standards and Codes on Banking Supervision, Insurance Supervision, and Securities Regulation This Report on the Observance of Standards and Codes on the Banking Supervision, Insurance Supervision, and Securities Regulation for South Africa was prepared by a staff team from the International Monetary Fund and the World Bank. The views expressed in this document, as well as in the full assessment reports, are those of the staff team and do not necessarily reflect the views of the government of South Africa or the Executive Board of the IMF. The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information. Copies of this report are available to the public from International Monetary Fund Publication Services th Street, N.W. Washington, D.C Telephone: (202) Telefax: (202) publications@imf.org Internet: International Monetary Fund Washington, D.C.

9 2011 G20 Summit and 2013 St Petersburg Summit 8 Key Attributes of Effective Resolution Regimes for Financial Institutions Endorsed SA commitment to necessary reforms to fully implement Key Attributes

10 South African International Best Practice 9 Key Attributes of Effective Resolution Regimes for Financial Institutions 15 October 2014

11 12 Essential Features of The Key Attributes 10 The Key Attributes set out twelve essential features that should be part of the resolution regimes of all jurisdictions. They relate to: Scope Resolution authority Resolution powers Set-off, netting, collateralisation, segregation of client assets Safeguards Funding of firms in resolution Legal framework conditions for cross-border cooperation Crisis Management Groups (CMGs) Institution-specific cross-border cooperation agreements Resolvability assessments Recovery and resolution planning Access to information and information sharing.

12 The Key Attributes 11 The Key Attributes set out twelve essential features that should be part of the resolution regimes of all jurisdictions. They relate to: Scope Resolution authority Resolution powers Set-off, netting, collateralisation, segregation of client assets Safeguards Funding of firms in resolution Legal framework conditions for cross-border cooperation Crisis Management Groups (CMGs) Institution-specific cross-border cooperation agreements Resolvability assessments Recovery and resolution planning Access to information and information sharing.

13 The Key Attributes: Resolution Authorities and Powers 12 Transfer of assets and liabilities 3.3 Resolution authorities should have the power to transfer selected assets and liabilities of the failed firm to a third party institution or to a newly established bridge institution. Any transfer of assets or liabilities should not: (i) require the consent of any interest party or creditor to be valid; and (ii) constitute a default or termination event in relation to any obligation relating to such assets or liabilities or under any contract to which the failed firm is a party (see Key Attribute 4.2)

14 Deletion of Existing Wording 13 REPUBLIC OF SOUTH AFRICA BANKS AMENDMENT BILL (ii) effect a disposal referred to in subparagraph (i) unless a reasonable probability exists that such disposal will enable the bank to pay its debt or meet its obligations and become a successful concern.

15 Burden of a Failure of a Financial Institution Funding of firms in resolution 6.1 Jurisdictions should have statutory or other policies in place so that authorities are not constrained to rely on public ownership or bailout funds as a means of resolving firms. 6.2 Where temporary sources of funding to maintain essential functions are needed to accomplish orderly resolution, the resolution authority or authority extending the temporary funding should make provision to recover any losses incurred (i) from shareholders and unsecured creditors subject to the no creditor worse off than in liquidation safeguard (see Key Attribute 5.2); or (ii) if necessary, from the financial system more widely.

16 Burden of a Failure of a Financial Institution 15 We are following through on our commitment to reduce moral hazard in the financial system. We are committed to design and implement a system where we have the powers and tools to restructure or resolve all types of financial institutions in crisis, without taxpayers ultimately bearing the burden. These powers should facilitate going concern capital and liquidity restructuring as well as gone concern restructuring and wind-down measures. We endorsed and have committed to implement our domestic resolution powers and tools in a manner that preserves financial stability.

17 Burden of a Failure of a Financial Institution 16 Preamble The objective of an effective resolution regime is to make feasible the resolution of financial institutions without severe systemic disruption and without exposing taxpayers to loss, while protecting vital economic functions through mechanisms which make it possible for shareholders an unsecured and uninsured creditors to absorb losses in a manner that respects the hierarchy of claims in liquidation.

18 Burden of a Failure of a Financial Institution Funding of firms in resolution 6.1 Jurisdictions should have statutory or other policies in place so that authorities are not constrained to rely on public ownership or bailout funds as a means of resolving firms. 6.2 Where temporary sources of funding to maintain essential functions are needed to accomplish orderly resolution, the resolution authority or authority extending the temporary funding should make provision to recover any losses incurred (i) from shareholders and unsecured creditors subject to the no creditor worse off than in liquidation safeguard (see Key Attribute 5.2); or (ii) if necessary, from the financial system more widely.

19 Burden of a Failure of a Financial Institution Safeguards Respect of creditor hierarchy and no creditors worse off principle 5.1 Resolution powers should be exercised in a way that respects the hierarchy of claims while providing flexibility to depart from the general principle of equal (pari passu) treatment of creditors of the same class, with transparency about the reasons for such departures, if necessary to contain the potential systemic impact of a firm s failure or to maximise the value for the benefit of all creditors as a whole. In particular, equity should absorb losses first, and no loss should be imposed on senior debt holders until subordinated debt (including all regulatory capital instruments) has been written-off entirely (whether or not that loss-absorption through write-down is accompanied by conversion to equity). 5.2 Creditors should have a right to compensation where they do not receive at a minimum what they would have received in a liquidation of the firm under the applicable insolvency regime ( no creditor worse off than in liquidation safeguard).

20 Burden of a Failure of a Financial Institution 19 REPUBLIC OF SOUTH AFRICA BANKS AMENDMENT BILL a reasonable probability exists that a creditor will not incur greater losses

21 November 2015: Financial Stability Board Progress Report 20

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23 22 The South African Reserve Bank (SARB) is a proactive supervisor, with a high level of compliance with international standards on effective banking supervision. The SARB s decisive action in placing African Bank under curatorship limited contagion. Its proposed bail-in of senior unsecured creditors to share in the burden of resolution is also welcome and a step in the right direction of reducing the too big to fail premium for the large banks. In addition, the crisis management and resolution framework should be upgraded. Early intervention powers of the SARB and other prudential regulators should be enhanced, and the intervention of African Bank underscores the need to introduce a resolution regime for banks and systemic nonbank financial institutions (NBFIs) that are in line with the Financial Stability Board s Key Attributes of Effective Resolution KA. As a member of the Financial Stability Board, the South African authorities are committed to reforming the resolution regime to make it compliant with the Key Attributes of Effective Resolution by end 2015.

24 Conclusion 23

25 24 Ke a leboha Ro livhuwa Inkomu Thank you Ke a leboga Dankie Ngiyathokoza Enkosi Siyabonga Ngiyabonga