Financial Matters Amendment Bill: finalisation; Banks Amendment Bill: rejected

This premium content has been made freely available

Finance Standing Committee

07 March 2019
Chairperson: Mr Y Carrim (ANC)
Share this page:

Meeting Summary

The Committee met for consideration and voting on the Financial Matters Bill, Report of the Financial Matters Bill and the motion of desirability on Banks Bill.

On the Financial Matters Bill, the Committee highlighted minor typographical changes to the Bill following deliberations on the previous day. There were no further policy changes. The Financial Amendment Bill was adopted with amendments.

The motion of desirability on Banks Amendment Bill noted that the majority in the Committee agreed with the approach in the Private Member Bill, but decided that the Financial Matters Bill was better because it provides for more qualifications and checks and balances on the formation of a state-owned banks and is drafted in the context of other applicable legislation that National Treasury is responsible for including the Public Finance Management Act and the Financial Sector Regulation Act. For reasons set out, the majority in the Committee decided to reject the motion of desirability on the Banks Bill and vote instead for the Financial Matters Bill. The motion of desirability was adopted

The Committee, having considered and examined the Financial Matters Amendment Bill referred to it, reported as follows: The Financial Matters Amendment Bill (FMAB) was introduced in the National Assembly on 31 January 2019. The FMAB proposes amendments to: the Insolvency Act, to amend the regulation of over-the counter derivative (OTC) markets in line with G-20 commitments; the Military Pensions Act, 1976 to address discriminatory provisions; the Banks Act, to enable state-owned companies to apply for banking licences subject to executive approval; the Government Employment Pension Law, to change the debt approach applied to public servants following divorce to a less burdensome approach of pensionable service reduction; and the Auditing Profession Act, to address challenges and limitations that the Independent Regulatory Board for Auditors faces in discharging its regulatory and oversight responsibilities. The Report on the Financial Matters Bill was adopted. The DA reserved its position. 

The Chairperson said he had received a letter from Mr F Shivambu (EFF) expressing his criticism for the Committee’s decision to vote in favour of the provisions related to a state-owned bank in the Financial Matters Bill rather than the Banks Bill introduced by the EFF. Mr Shivambu was strongly critical of the decision and “instructed” the Committee not to reject his Bill but rather to roll it over to the next Parliament. He described Mr Shivambu’s letter, with its accusations that the Treasury was racist, as “offensive” and refused to allow it to be distributed to Members. To accuse a Treasury official of being a racist was completely unacceptable in terms of parliamentary norms, thus Mr Shivambu's letter would be returned to him so he could write another appropriate one. Mr Shivambu had no right to “instruct” the Committee. There was nothing wrong with Mr Shivambu submitting his Bill to the next Parliament as long as it was substantively different and raised new issues not covered by the Bill adopted by the Committee. There was no provision in parliamentary rules for a Bill to be rolled over.
 

Meeting report

The Chairperson welcomed everyone and asked Treasury to highlight further amendments to the Financial Matters Bill following deliberations the previous day. Treasury and Committee Staff had worked very hard and had done a good job under the circumstances.

Financial Matters Amendment Bill

Ms Empie Van Schoor, Chief Director: Legislation, National Treasury, highlighted minor typographical amendments to the Bill. There were no further policy changes.

The Chairperson took the Committee through the Bill formally, and noted no objections from Members. He put the Bill up for adoption.

Ms T Tobias (ANC) moved.

Ms P Nkonyeni (ANC) seconded.

The Financial Matters Amendment Bill was adopted with amendments.

Motion of desirability for Mr Shivambu’s Private Member Bill
The Chairperson said the motion of desirability on the Banks Amendment Bill noted that the majority in the Committee agreed with the approach in the Private Member Bill, but decided that the Financial Matters Bill was better because it provides for more qualifications and checks and balances on the formation of a state-owned banks and is drafted in the context of other applicable legislation that National Treasury is responsible for including the Public Finance Management Act and the Financial Sector Regulation Act. These restrictions were important given the possible fiscal risks facing the state should the state-owned bank have to be bailed out. The restrictions include the fact that the minister of finance, in concurrence with the minister having jurisdiction over the state-owned entity wanting to establish a bank, must agree to its application. 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. For reasons set out, the majority in the Committee decided to reject the motion of desirability on the Banks Bill and vote instead for the Financial Matters Bill. He put the motion of desirability up for adoption.
 
The motion of desirability was adopted.

The Chairperson said he had received a letter from Mr Shivambu expressing his criticism of the Committee’s decision to vote in favour of the provisions related to a state-owned bank in the Financial Matters Bill rather than the Banks Bill introduced by the EFF. Mr Shivambu was strongly critical of the decision and “instructed” the Committee not to reject his Bill but rather to roll it over to the next Parliament. He described Mr Shivambu’s letter, with its accusations that the Treasury was racist, as “offensive” and refused to allow it to be distributed to Members. To accuse a Treasury official of being a racist was completely unacceptable in terms of parliamentary norms, thus Mr Shivambu's letter would be returned to him so he could write another appropriate one. Mr Shivambu had no right to “instruct” the Committee. There was nothing wrong with Mr Shivambu submitting his Bill to the next Parliament as long as it was substantively different and raised new issues not covered by the Bill adopted by the Committee. There was no provision in parliamentary rules for a Bill to be rolled over.

Ms Tobias said in a normal setting the Committee should not even entertain Mr Shivambu’s letter because of its strong language. The legality of rolling over a Bill at this stage would have to be tested. It was Mr Shivambu’s problem if he was not inducted properly on how Parliament functions. His skipping of meetings meant he was not part of the full discussions on the Financial Matters Bill.

Consideration of Report on the Financial Matters Bill
The Chairperson took the Committee through the Report on the Financial Matters Bill. The Committee, having considered and examined the Financial Matters Amendment Bill referred to it, reported as follows:
The Financial Matters Amendment Bill (FMAB) was introduced in the National Assembly on 31 January 2019. The FMAB proposes amendments to: the Insolvency Act, to amend the regulation of over-the counter derivative (OTC) markets in line with G-20 commitments; the Military Pensions Act, 1976 to address discriminatory provisions; the Banks Act, to enable state-owned companies to apply for banking licences subject to executive approval; the Government Employment Pension Law, to change the debt approach applied to public servants following divorce to a less burdensome approach of pensionable service reduction; and the Auditing Profession Act, to address challenges and limitations that the Independent Regulatory Board for Auditors faces in discharging its regulatory and oversight responsibilities.

Amendments to the Insolvency Act
After the 2008 global financial crisis G-20 states agreed that non-centrally cleared OTC derivatives contracts should be regulated in accordance with a unified international standard. From 2016 the
National Treasury, Prudential Authority and Financial Sector Conduct Authority began the process of proposing amendments to the Insolvency Act to ensure that South Africa complied with its international obligations. The proposed amendments to the Insolvency Act will ensure that: creditors who enter into derivatives contracts and exchange collateral will be able to keep the proceeds during insolvency; South Africa will meet the G-20 deadline of September 2019 to strengthen the regulation of OTC derivatives; domestic banks will continue to enter into OTC derivatives transactions with their foreign counterparties; and systemic risk will be reduced and financial stability maintained. Following stakeholder consultation, the Committee made changes to the amendments to the Insolvency Act in the FMAB.

Amendments to the Military Pensions Act
These amendments are necessary to recognise all types of relationships, including life partnerships, to qualify for benefits and to ensure gender neutrality in accordance with the Constitution.

Amendments to the Banks Act
As the Financial Matters Bill included provision for the formation of a state-owned bank, it was considered together with the Banks Amendment Bill, introduced by Mr F Shivambu, as a Private Members Bill which has the same objective. The amendments to the Banks Act provides for state-owned companies meeting the prudential and other requirements of the Banks Act to apply for authorisation to establish a bank. The substance of the amendments to Banks Act amendment in the FMAB were already extensively deliberated following the introduction of the Banks Amendment Bill (BAB). The Committee decided that the FMAB was better than the BAB because it provides for more qualifications and checks and balances on the formation of a state-owned bank and is drafted in the context of other applicable legislation that National Treasury is responsible for including the Public Finance Management Act and the Financial Sector Regulation Act. While the Committee fully supports state-owned banks and in particular the expeditious processing of the licencing of the Postbank, we believe that because of the possible fiscal risks posed by state-owned banks which may require bailouts, the above qualifications are necessary to restrict the circumstances in which state-owned banks are formed and therefore believe that the FMAB provisions on state-banks are better than those in the BAB. The Committee decided not to deal with whether provincial SOCs should be allowed to establish banks and, if so, under what conditions, as there is a need for a more extensive discussion on this and there simply was not the time to do this.

Amendments to the Government Employment Pension Law
These amendments address the prejudice suffered by divorced public servants through the current debt approach. It entails a debt (a “forced” loan) which accrues interest. Upon exit, the member may receive a reduced or no cash payment (gratuity) and, if the gratuity is insufficient, the annual pension paid monthly will also be reduced. The reduction of pensionable service is the approach adopted by most pension funds and results in a more predictable outcome for the member. The Public Service Co-ordinating Bargaining Council adopted a resolution in support of the service reduction approach. The Public Protector also received complaints about the current debt approach.

Amendments to the Auditing Profession Act
The Committee deeply regrets that it was unable to process these amendments especially as they are so urgently needed and the Committee itself has been putting pressure on Treasury for some while to bring these legislative amendments to Parliament. It was just not possible to process the amendments in view of the very limited time available before the 5th term of parliament ends. The National Assembly rises on 20 March and the NCOP on the 28 March for the 8 May elections, and after consultation between the decision-making authorities in both Houses, the Committee was advised that the NCOP will not be able to process the amendments to the Auditing Professions Act before the end of the 5th term of Parliament as they are too elaborate and they are being contested. Also, the Standing Committee on Finance just did not have enough time to process these amendments. The Minister of Finance is urged to bring these amendments to the next Parliament as soon as possible after it is convened and we recommend, with due respect, that the incoming Committee processes these matters expeditiously. The Committee expresses its severe criticism of Treasury for introducing the FMAB so late on the eve of the ending of the 5th term of parliament, and had it not been for the fact that we had, as explained, extensive discussions on policy issues related to state-owned banks through considering the BAB we would not have been able to finalise this aspect of the FMAB. Fortunately, the amendments to the Military Pensions Act and Government Employees Pension law were basically technical amendments and could be processed easily. Following extensive consultation between Treasury, the South African Reserve Bank (SARB), the Johannesburg Stock Exchange (JSE) and the Banking Association of South Africa (BASA) there was agreement on the insolvency provisions and following representations by the SARB Governor and in view of the urgency of the matter, as explained above, the Committee considered these amendments and the further amendments that came through and decided to vote on them. He put the report up for adoption.

Ms Tobias moved.

Ms N Ntantiso (ANC) seconded.

The Report on the Financial Matters Bill was adopted.

The DA reserved its position. 

The Chairperson thanked everyone and adjourned the meeting.

 

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: