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#BizTrends2019: Banking and finance law - big changes on the cards
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Furthermore, these amendments seek to ensure that depositors’ funds will be protected and paid out in a speedily manner. This has been done in order to protect the most vulnerable customers in the event of a financial institution’s failure. These amendments will apply to all banks registered in terms of the Banks Act, which includes mutual banks.
The Bill also aims to provide for amendments to the Insolvency Act of 1936, which would result in over-the-counter (OTC) derivative transactions, for which pledged collateral has been realised on the insolvency of the posting party, becoming a statutorily limited form of recourse. The OTC derivatives in these instances will be limited to the extent of the initial margin and/or variation margin posted and no further unsecured claim by the secured party will be permitted.
Should these amendments be made, South Africa will be one step closer to compliance with its G-20 commitments to regulate OTC derivatives in South Africa.
Lastly, proposed amendments to the Banks Act, if promulgated, will allow state-owned entities to obtain licenses to operate as fully fledged banks (something previously not permitted). Currently, the Banks Act only allows public companies to register as a bank or bank controlling company. Up until now, state-owned companies had to obtain numerous exemptions in order to operate as a bank. The proposed amendments to the Banks Act would remove the need for these exemptions and would allow entities such as the Postbank and the Land Bank to register and operate as fully operational banks.
This is an exciting time in the banking and financial services sector. It is hoped that the amendments will be both sustainable and that they will encourage transactions within South Africa, as well as increase the reach of banks and their respective services to members of the public.