House Chairperson, the DA accepts the need to introduce a regulatory framework for credit rating agencies. This need flows from the commitments of the G20, but more importantly it will ensure that South Africa remains open to institutional investors from Europe whose governing legislation now requires us to establish broad equivalence with their regulatory framework.
However, that does not mean that our approach should simply emulate the particularly heavy-handed approach taken by the European Union, EU, as this Bill tends to. We maintain that equivalence could have been established with a much lighter touch.
In general, National Treasury's approach to financial regulation, following the global financial crisis, seems to be one of overreaction without sufficient consideration of the cost of regulation.
Treasury officials have spoken gleefully in the committee about how they are eager to confer what they call "draconian powers" on regulators. The definition of draconian is overly harsh and severe. Surely this is, at the very least, an unfortunate choice of words. At worst, it may represent a growing power hunger in National Treasury and the Financial Services Board, FSB. So, the committee found itself having to work hard to ensure that this new legislation is balanced and appropriate and that civil liberties are protected.
It's clear to us that National Treasury and the FSB overplayed their hand in the original drafting of the Bill by taking this overbearing approach that was out of step with regulations in many other smaller markets. They seem to give insufficient consideration to the costs of compliance and how those costs will simply be passed on to the issuers of debt.
In this regard, it's worth remembering that approximately 60% of debts in South Africa are issued by the public sector; meaning that increased costs of debt issuing will be borne by taxpayers.
In particular, the endorsement framework established by this Bill seems to require the endorsement of every single credit rating produced offshore for use in South Africa. This framework is unnecessarily onerous and should have been replaced by a simple blanket endorsement by the registrar of all credit ratings from approved external credit rating agencies. That blanket endorsement is in there, but it's alongside this complex endorsement framework for no obvious reason.
Having said that, while we would have strongly opposed the original draft of the law, the major problems were fixed by our working committee. The remaining problems, such as the overambitious role envisioned for compliance officers and the requirement that a credit rating agency must ensure that a member of the public understands how a credit rating was arrived at, are relatively minor.
During the committee process, we made significant progress in limiting the powers of the registrar in terms of site visits and requests for information that aren't required in terms of this Act. We managed to take out clauses that would have prevented credit rating agencies from limiting their own liability through individual contracts and we removed the ability of the Financial Services Board, FSB, to prescribe rules around rating assumptions.
So, the bottom line is that we will vote in favour of this Bill now. But we most certainly wouldn't have supported it in the form in which it came to our committee. That we now do so, as the DA, is credit to the hard work of the Standing Committee on Finance in fixing this Bill. I thank you. [Applause.]