Chairperson, hon members, the Banks Amendment Bill before this House today, is yet, another step in the economic and social transformation that this country has undergone since an ANC-led government took over. Our ANC-led government is currently grappling with legislation that would allow for new tiers of banking such as savings and loan banks. This Bill based on the, or informed by Basel II, enables the current highly concentrated banking sector to be opened to the lower middle income consumer. This is a statutory instrument to implement the new capital accord which will further strengthen the credibility and stability of the international banking system of which South Africa is a sound member.
Some of the highlights which we have already heard today, which I want to ensure that I have time to mention, are that, while improvements and risk management systems as well as human resource training may contribute to some degree to the cost of regulatory compliance, it would also result in lower capital charges.
This is extremely pertinent to South Africa where the smaller banks with limited capacity will now be able to avoid higher charges and this is certainly going to be done through this Bill once it is enacted, by targeting more standardised approaches which are similar to the existing requirements of Basel I.
One of the things which, I think, we have learnt as a country and an international banking community, is that Basel I gave us a first opportunity to address capital requirement and risk management. But what is particularly important is that through its implementation and application, we began to realise, particularly South Africa and other developing countries - but of course our banking system is on a par with the First World - that you cannot go with a ``one-size-fits-all'' financial system. You need not only to strengthen the credibility and stability but you also need to ensure that there is a lot more flexibility. And this is now being done.
The three-pillar concept, which we all heard the Minister allude to and others have enabled this much broader approach to the banking system so that the "Pillar 1", the supervisory, the capital requirements, "Pillar 11" the supervisory review process and the market discipline in "Pillar 3", enable us to address three interrelated but different challenges facing banking in our country.
The other fact which I think we can't ignore is that over the past 20 years or so, there has been, without a doubt, a significant change in the environment that we face whereas prior to this we know that physical geography used to be an impediment. Today it is absolutely no impediment to the movement of money and the growth in our cross border, trade, finance and investment, has accelerated beyond our expectations.
Perhaps another significant aspect which this Bill will address within the Basel II framework are the technological advances that have been made - the computing power, the storage, the networks, the communications. Of course, there is capacity now to do what we perhaps could not have done some 20, 15 or 10 years ago - which was to develop highly sophisticated and complex products with the advances in financial engineering.
Another aspect that I just want to touch on is that there is often a view or perception that if we address, maintain and meet some of the international standards required in this instance by the banking system, we may in fact overlook the challenges facing our own country.
However, the flexible approaches that Basil II offers as options to each country looking at it enables us to address economic groupings, financial investments and so on, that stretches from your macro international financial investments right down to your small and micro enterprises and so on. I think that is very important.
Another very useful aspect of this Bill, and a very constructive aspect, is the whole approach to the supervisory element. Rather than simply a stickler approach, there is a home network and regulatory framework and support process enables the bank itself to offer far more support, especially to fledgling financial investment institutions and the smaller banks. Under this Bill they will be able, once it has been enacted, to intervene at much earlier stages to prevent capital falling from below minimum levels.
Various other criteria have been identified peculiar to each country's financial system. Particularly important in our country, is the fact that transparency has received a fresh sense of support. Here the enhanced disclosure which we didn't have before, will improve our ability to engage and interact with the banks and will also provide incentives to avoid bank failure and prevent it.
I think, the poorly managed banks will become more and more a thing of the past and will no longer happen by accident because there will be all of the capacitating.
The last point that I wish to make is that the expanded risk measures in respect of both capital requirements and operational risk management will lead, I believe, to more efficient allocation of resources within the banks and improved international competitiveness while at the same time expanding the access of finance to the broader population which after all is the goal of our ANC-led government.
The ANC supports this Bill. I thank you. [Applause.]