Chairperson, hon members, we are guided and driven by a resolve that calls for the building of technical capacities of the government, with a view to a democratic developmental state and a resolution that speaks to the building and standardisation of finance institutions that are accessible to the people and are able to effectively channel financial and institutional resources towards a variety of economic transformation objectives. At the centre of the attainment of these resolutions is the need to build sound banking and financial stability.
The Banks Amendment Bill, inter alia, provides for the following: the amendment of the Banks Act of 1990, so as to bring certain provisions in line with their practical application; the updating of references to legislation and institutions; the provision that a contravention of the Financial Intelligence Centre Act of 2001 is a cause for suspension or cancellation of registration as a bank; the alignment of the Banks Act of 1990 with the Companies Act; and further compliance with the requirements of the Basel Committee on Banking Supervision, and matters connected therewith.
Amongst other things, the Bill empowers the Registrar which, in our case, is the Reserve Bank to cancel a bank's registration after consultation with the Minister and notifying the institutions concerned. The apparent benefits of this amendment will be to increase the speed with which the regulator can withdraw a banking licence.
One lesson that is coming out of the global financial crisis was the speed at which bank regulators had been able to act and avoid a run on a bank, but also the speed with which the anxiety of depositors was managed. To provide for this, the Bill empowers the Governor of the SA Reserve Bank to appoint a curator if he or she deems it desirable in the public interest by notifying, in writing, the chief executive officer or the directors of the said bank.
The primary idea is to target the speed at which the regulator will be able to intervene in cases where the business of banking institutions places a systematic risk on the South African banking system. In addition, the Bill gives clarity on companies acquiring an interest in a company outside the Republic.
Finally, the Bill touches on and gives clarity on the topical issue of remuneration in the banking sector and also in compliance with the King III report. It emphasises the need to establish independent remuneration committees comprising of independence and nonexecutive directors. These amendments are a step in the right direction and deserve everyone's support. Ke a leboga. [I thank you.] [Applause.]
There was no debate.
Declarations of vote:
House Chairperson, the DA agrees with the broad thrust of this Bill to amend the bank sector, because it defines the responsibility of a bank's remuneration committee in clause 34. It presents a real opportunity to reform the law to ensure that the executive pay is linked to their performance. The DA has a progressive and bold policy in this area.
We believe that we need to overhaul our laws, including the Companies Act, to ensure that transparency is increased so that shareholders can see more easily what the executives are being paid. We also believe that the power of the shareholders to hold the executives to account must be boosted, too.
Amongst other reforms, we propose that all auditor companies should publish the total figure for each director in their financial statements. Also, these companies should include an explanation of how the executive's pay relate to the company's performance. Furthermore, shareholders should get a real say over executives' pay. So, this Bill present the first real opportunity for the DA to get some of these proposals into legislation.
In the committee, we moved an amendment on clause 34, which the Whip was talking about, to require that a bank's remuneration committee must consult with shareholders on their executive's pay. We are very pleased that the committee saw it fit to support the DA. So, we support this Bill, especially this amendment, which is an important first step in our campaign to ensure that the executive's pay is aligned to performance. With this campaign, the DA will work to tackle those high-powered corporate insiders who abuse remuneration committees that are not independent, and abuse shareholders who are not sufficiently informed. I thank you.
House Chairperson, I rise on behalf of Cope to support this Bill, to support the caretaker, the chairperson of the committee, Van Rooyen, and also to echo the remarks made by the hon Harris, in respect of the remuneration of CEOs, which in some instances is outrageous.
Chairperson, I rise on behalf of the IFP to support this Amendment Bill, and wish to say that we trust that this kind of regulation of remuneration will be extended to those that head up our state-owned enterprises.
In the past, we have had - I have raised this with Minister Gigaba - some of the CEOs that were paid exorbitant salaries. That is why we got strikes, because ordinary people then compared their salaries, which were not even a millionth of what the CEOs earned, let alone the preferential shares and the pensions they get when they retire. I think it is good that the banks are looking at this and that there is a remuneration committee. We will support this Bill.
House Chairperson, the ANC has a clear view on this matter; safe to say that we agree with the broad understanding that the opposition has. We want to further clarify the premise underlying this amendment, namely that the existing remuneration structures create perverse incentives to engage in risk behaviour which may pose substantial risk to the soundness of the South African banking system.
The successes of banking institutions, like most business enterprises, rely on their capability to attract the best available talent. Generally, the primary bargaining tools employed by banks are financial incentives. This leads a bank to offer progressively aggressive remuneration packages for the executive due to the performance nature of the industry. Remuneration packages tend to rely on lofty targets, which can encourage reckless behaviour. I thank you.
Bill read a second time.