Financial Matters Amendment Bill: deliberations

Meeting report

Deliberations on the Financial Matters Bill

The Chairperson, in opening, said after consultations with parliamentary authorities, the understanding was that the Committee could not fully process the Financial Matters Bill. Following the said engagements, the Committee would only process the amendments to the Military Pensions Act- which are straightforward, as well as the amendments to the Banks Act, which had been extensively discussed in the Private Members’ Bill brought forth by Mr F Shivambu (EFF). In fairness to Mr Shivambu, the Committee would need to vote on his Bill. He asked Treasury to highlight the differences between its proposed amendments to the Banks Act and Mr Shivambu’s Banks Bill.

Mr Roy Havemann, Chief Director: Financial Markets and Stability, National Treasury, said the amendments to the Banks Act as proposed by Treasury had more qualifications and checks and balances restricting the circumstances under which a state-owned entity could apply for a banking licence. The restrictions include the fact that the Minister of Finance, in concurrence with the relevant minister having jurisdiction over the state-owned entity wanting to establish a bank, must agree to its application. The executive authority in the case of Post Bank would be the Minister of Telecommunications and Postal Services. Another restriction is that only qualifying state-owned companies that are financially sound may apply for authorisation to establish a bank. The assets of the company as well as those of its holding company and the holding company of its holding company must exceed its liabilities.

The Chairperson said these restrictions were important given the possible fiscal risks facing the state should the state-owned bank have to be bailed out. The aim at this stage was simply to understand the contents of the Bill. Policy decisions would be taken after Treasury gives responses to submissions on the Bill the following day.

Mr F Shivambu (EFF) said the Private Members’ Bill  (Banks Amendment Bill) was broadly addressing the question of the permissibility of having a state bank. The qualifications highlighted by Treasury were immaterial because those must be part of the conditions for granting a banking licence. The matter was being dragged too far. Also, a provision for the licencing of provincial and municipal entities as state banks must be looked into at a later stage.

Ms G Ngwenya (DA) said the DA would want to see an additional amendment to clause 11b which reads: a state-owned company may only with the approval of the Minister, granted with the concurrence of the executive authority, as defined in section 1 of the Public Finance Management Act, of the state-owned company, apply for authorisation to establish a bank in terms of subsection (1). The DA believed an SOE could only apply for a licence with the approval of the Minister and the concurrence of Parliament. An application for a banking licence by an SOE would mean an addition or change in its mandate upon venturing into the banking space. Changing the mandate of an SOE should be proposed with Parliament’s consideration.

The Chairperson said the ANC’s mandate was to finalise the Bill before end of term. These amendments were urgently needed and for some time now the Committee had asked National Treasury to bring them to Parliament. The amendment to the Banks Act would only allow SOEs to establish a bank at national level.

Provincial and municipal entities will not be allowed to establish banks, though the KwaZulu-Natal provincial government's Ithala Bank will be allowed to continue operating under its exemption from the Banks Act. The Committee decided not to deal with the issue of provincial entities establishing a state bank as it believed that this required more exhaustive deliberations. This matter would be referred to the finance committee of the next Parliament.

Ms P Nkonyeni (ANC) agreed and added that the ANC viewed amendments to the Banks Act as progressive and called for their adoption.

Ms Ngwenya pointed out that during previous engagements, the majority Members and Treasury repeatedly made reference to the licencing of the Post Bank. However, as it stood the proposed amendments to the Bank Act said nothing about the Post Bank.

The Chairperson said the Committee was not processing a Post Bank licensing Bill. The amendments to the Banks Act provide for the establishment of state banks, and even if the DA does not agree to it, the two other parties (ANC and EFF) felt very strongly about it. The ground had been covered already. However, on the part of the ANC, there was no intention to create a plethora of state banks at this stage. It is primarily the Post Bank that was to be licensed, but there may be circumstances in future calling for the licencing of more state banks. That was ANC policy and the majority would not apologise for that. The only policy issue that remains was whether Parliament should have a say in the licensing, of which the ANC would have to meet as a study group to determine this.

Mr Shivambu pointed out that Parliament plays an oversight role and having it give approval for the licensing of state banks could be construed as legislative overreach. The granting of licences is an administrative function discharged by the Executive. Parliamentary concurrence could not be part of the mandate of the legislature.  

The Chairperson agreed and noted that amendments to the Military Pensions Act as part of the Financial Matters Bill were straightforward and had been discussed during previous engagements. Further, the Committee regrets that because the amendments to the Auditing Professions Act came so late and the fifth term of Parliament ends so soon, there was not enough time to finalise the legislative amendments to give the Independent Regulatory Board for Auditors (IRBA) more powers to investigate and impose harsher penalties on auditors who commit offences. The Committee would meet with Treasury the following day for responses to public submissions on the Financial Matters Amendment Bill.

The meeting was adjourned.