Banks Act Amendment Bill, 2003

1
Banks Act Amendment Bill, 2003
Gender Sensitivity

• Bulk of amendments
• his, him, himself, chairman, he
• Gender neutral person to him/her,
  his/her

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Banks Act Amendment Bill, 2002
Amended Legislation

• Exchequer Act - Public Finance Management Act,
  1999
• - liquid assets securities ito PFM to
  fund the National Government
• Inspection of Financial Institutions Act, 1998
  (1984)
• - sections 6, 69, 84

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Banks Act Amendment Bill, 2002
Existing Practices

• Regulations relating to branches
• - sections 1 18A
• DI020 Registrar to require at any time
• - section 1(1A) not only with new
  appointment
• Circulars also for distribution of
  information
• - section 6(4)
• Due diligence at expense of bank
• - section 7

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Banks Act Amendment Bill, 2002
Existing Practices (cont.)

• Regulations relating to banks
• - sections 12, 16 43
• Revocation of authorisation 6 months (12
  months)
• - section 14 (section 16)
• Name bank also divisions, brands products
  
• - sections 22(1) 22(5) include
  branches/rep offices
• Illegal deposit-taking by persons not
  registered as a bank
• - section 81 include branches

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Banks Act Amendment Bill, 2002
Amended Names

• Supreme Court High Court
• - sections 25, 28, 37(5), 54(8) 81(1)

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Banks Act Amendment Bill, 2002
Deletions

• Consultation with Competition Commission
  (37(2)(b))
• - Competition Act concurrent jurisdiction
  (may consult)
• Parliamentary procedure to amend Companies Act
• - section 51(3)

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Banks Act Amendment Bill, 2002
Section 50 Controlling Company Investments

• Certain non-bank investments by controlling
  companies
• Not to exceed 40 of share capital reserves
• of bank and controlling company on a
  consolidated basis

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Banks Act Amendment Bill, 2002
Subordinated Legislation

• Enabling regulations relating to representative
  offices
• - section 34
• Enabling compliance function
• - section 60A
• Enabling corporate governance
• - sections 1 and 60B

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Banks Act Amendment Bill, 2002
Subordinated Legislation (cont.)

• Compliance function - section 60A
• - bank shall establish independent
  compliance function
• - headed by compliance officer
• - perform function with reasonable care and
  skill
• - Registrar may set requirements in
  regulations

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Banks Act Amendment Bill, 2002
Subordinated Legislation (cont.)

• Corporate Governance - section 1
• - irt management of a bank/controlling
  company
• - includes all processes, policies, systems
  procedures
• - ensure compliance with strategic
  framework
• - officers adhere to correct proper
  corporate behaviour
• - balance interests of shareholders and
  other stakeholders
• - minimise/avoid conflict of interest
  bank/officers
• - ensure responsible conduct by officers
• - ensure maximum profitability within
  acceptable risk profile
• - timely accurate disclosure of
  material matters

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Banks Act Amendment Bill, 2002
Subordinated Legislation (cont.)

• Corporate Governance - section 60B
• - officers establish and maintain
• - adequate effective process of corporate
  governance
• - consistent with nature, complexity and
  risks inherent in bank
• - Registrar may set requirements in
  regulations

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Banks Act Amendment Bill, 2002
Section 60 Duties of Directors

• officers directors, CEO, executive officers
  secretary
• officers owe fiduciary duty and duty of care
  skill to bank
• - act bona fide for benefit of bank
• - avoid conflict of interests
• - possess knowledge and skill reasonably
  expected
• - exercise care in carrying out functions

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Banks Act Amendment Bill, 2002
Section 60 Legal Action by Registrar

• Registrar may institute action ito section 424
  Companies Act
• - against officers knowingly carrying on
  reckless business
• - amount recovered applied
• - expenses incurred by Registrar
• - off-set amounts paid by Registrar or
  DIS
• - pro rata payment of losses of
  depositors

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Banks Act Amendment Bill, 2002
Section 60 Appointment of Officers

• Non-executive directors
• - bank gives Registrar written notice of
  nomination DI020
• - 30 days prior to appointment
• - Registrar may object to chairperson within
  20 days
• - bank shall not appoint / appointment has
  no legal effect
• - disputes settled by arbitration section
  60(6)

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Banks Act Amendment Bill, 2002
Section 60 Appointment of Officers

• Executive officers
• - bank gives Registrar written notice of
  appointment DI020
• - Registrar may object to chairperson within
  20 days
• - appointment terminated within 14 days
• - disputes settled by arbitration section
  60(6)

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Banks Act Amendment Bill, 2002
Section 60 Current Officers

• Registrar may terminate appointment of current
  officers
• - if he has reason to believe
• - officer is no longer fit proper
• - or not in public interest to continue with
  appointment

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Banks Act Amendment Bill, 2002
Section 60(6) Procedure

• Registrar notifies officer concerned also CEO
  and chairperson
• Officer concerned - written response within 14
  days
• Registrar gives decision in writing within 14
  days thereafter
• Disputes referred to AFSA for arbitration
• Arbitrator confirms termination and termination
  immediate
• or does not confirm termination and
  appointment continues
• Arbitrators finding is final and not subject
  to section 9 review

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Banks Act Amendment Bill, 2002
Section 61 Appointment of Auditors

• Registrar approves auditor of bank
  controlling company
• Enabling the rotation of auditors as prescribed
• Grounds for refusal or withdrawal of approval

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Banks Act Amendment Bill, 2002
Section 64 Audit Committee

• Further functions may be prescribed by
  regulation

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Banks Act Amendment Bill, 2002
Section 64A Risk Committee

• Board to appoint at least 3 members (2
  non-executive)
• to Risk Committee
• Functions (to assist board)
• - to evaluate adequacy/efficiency of risk
  policies, practices
• - to identify build up/concentration of
  risks
• - to develop risk mitigation strategy
• - to ensure annual risk assessment is
  undertaken
• - to regularly monitor all key
  risks/performance indicators
• - facilitate and promote communication on
  above matters
• - establish independent risk management
  function/training
• - further functions as prescribed by
  Regulations

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Banks Act Amendment Bill, 2002
Section 64B Corporate Governance Committee

• Consist of ALL non-executive directors
• Functions (to assist board)
• - to evaluate adequacy/efficiency of
  corporate governance
• - to maintain board continuity programme
• - performance/succession planning
• - regular review of mix of skills
  experience
• - annual self assessment of board
• - nomination of successors to board
• - terminate appointment of delinquent
  directors
• - ensure compliance with laws, regs, codes
  practises
• - further functions as prescribed by
  Regulations

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Banks Act Amendment Bill, 2002
Clarifications

• Sections 70(2)(a)(ii) 70(2B)(a)(ii)(aa)
• - delete (1)(a)(ii) in reference to section
  75
• Section 73(1)(b)
• - insert relating to any private sector
  non-bank person
• Section 76
• - insert of any company after the word
  shares

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Banks Act Amendment Bill, 2002
Section 77 Restricted Investments

• Restriction of investments in debentures etc by
  banks
• Limited to 10 of amount prescribed by
  Regulations

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Banks Act Amendment Bill, 2002
Section 78(1)(b) Undesirable Practices

• Banks shall not lend money against security of
  own shares
• Or against security of controlling company
  shares

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Banks Act Amendment Bill, 2002
Section 78(1)(k) Undesirable Practice

• Bank shall not pay out dividends from share
  capital
• Without prior written approval of Registrar

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Banks Act Amendment Bill, 2002
Section 84(6) Recovery of Costs of Inspection

• Costs of inspectors and fund managers
• Relating to inspection of unregistered persons
• Remuneration as determined by Registrar
• Registrar may recover cost from person
  inspected

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Banks Act Amendment Bill, 2002
Section 91 Increased Penalties

• R100 000 and/or 5 years to R1m and/or 10 years
• R10 000 and/or 6 months to R100 000 and or 5
  years
• Fines for late returns R100 to R1000 for every
  day

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Banks Act Amendment Bill, 2002
Section 91(6A) Incorrect Information

• If any person submits return, statement, report
  etc
• to Registrar in terms of the Act
• and information is incorrect or inaccurate
• Registrar may impose a fine of R1000 per day
• that the return etc is not revised, corrected
  or resubmitted