Chairperson, hon members, the Banks Amendment Bill seeks to substantially announce a regulatory framework for banks in this country. Furthermore, it seeks to effect the latest international standards published as the revised framework on International Convergence of Capital Measurement and Capital Standards, better known as Basel II of the New Capital Accord.
The aim of Basel II is to enhance financial stability in the system by ensuring that banks keep sufficient capital to cover various risks associated with their business. Basel II does this by requiring banks to risk weight or the assets to hold minimum capital to back any loss associated with those assets. This is important since these assets, which are dominated by loans and advances, are predominantly funded by deposits from the public.
Basel II, as broadly incorporated in the Bill, before the House today, seeks to achieve this by introducing three pillars to the banking regulatory framework. The first pillar deals with capital requirement; the second pillar deals with the supervisory review process and the third pillar deals with market discipline.
The incorporation of the three pillar framework into the legislation will ensure: Firstly that enhanced regulation of all relevant banks and banking groups are on a consolidated basis; secondly clearly define roles and responsibilities of consolidating and host supervisors; thirdly the co- operation and sharing of information between supervisors; fourthly clarifications of the responsibilities of banks, banking groups, boards of directors and banking groups; fifthly improved disclosure requirements for banks and banking groups; sixthly risk-sensitive minimum capital requirement in respect of credit, market and operational risk exposures; and seventhly an enhanced supervisory review process in order to, among other things, assess the capital adequacy and control environment of both banks and banking groups.
The National Treasury also undertook an extensive economic impact study of the implementation of Basel II in South Africa. The result of this study indicates that while the potential direct impact on the bank capital requirements, bank pricing and the macro economy is expected to be negligible, the potential longer term economic impact is considered to be significantly positive, given that Basel II is expected to lead to improved international competitiveness, enhanced financial stability and more efficient allocation of economic capital.
The Banks Amendment Bill of 2007 has gone through very extensive consultation. The passing of this Bill into an Act this year will ensure that South Africa fulfils its commitment to implement Basel II on 1 January 2008, which will put South Africa in the leading group of countries that have introduced this measure of international best practices. The passing of the Bill will also send a clear message that the confidence that international and local investors have in entrusting their monies with our banks is well placed.
I would like to take this opportunity to thank the Registrar of Banks for all the efforts in assisting with the Bill. I would also like to thank the Deputy Minister, Jabu Moleketi, the Director-General of National Treasury and his team, and more importantly, the Portfolio Committee on Finance, under the able chairpersonship of Mr Nhlanhla Nene.
I, hereby, table the Banks Amendment Bill for consideration and debate now. Thank you, Chair. [Applause.]