There have been two key developments in the financial regulatory space which stakeholders should be aware of. Firstly, to the Financial Sector Laws Amendment Bill and also to the Pension Funds Amendment Bill. Comments on both should be in by no later than 12:00 on Monday 17 May 2021. Details below
Update on The Financial Sector Laws Amendment Bill
The Financial Sector Laws Amendment Bill, (FSLAB) proposes amendments to several existing pieces of legislation. The most significant proposed amendments are those to the Financial Sector Regulation Act, 2017 (FSR Act). It provides for the establishment of a framework for the resolution of designated institutions to ensure that the impact or potential impact of a failure of a designated institution on financial stability is managed appropriately. It designates the Reserve Bank as the resolution authority and establishes South Africa's deposit insurance scheme, including a Corporation for Deposit Insurance and a Deposit Insurance Fund. It also provides for co-ordination, co-operation, collaboration and consultation between the Corporation for Deposit Insurance and other entities in relation to financial stability and the functions of those entities, it makes provision for designated institutions in connection with resolution matters and further provides for information required to assess the respective levy.
To effect consequential and technical amendments to certain provisions in the FSR Act, specifically to align other legislation with the resolution framework that will be established through the amendments to the FSR Act, certain amendments have been made to the Insolvency Act, 1936, the South African Reserve Bank Act, 1989, the Banks Act, 1990, the Mutual Banks Act, 1993, the Competition Act, 1998, the Financial Institutions (Protection of Funds) Act, 2001, the Companies Act, 2008, the Financial Markets Act, 2012, and the Insurance Act, 2017.
On 17 August 2020, the FSLAB was tabled in the National Assembly. The Standing Committee on Finance met on 16 March 2021 for a briefing by the National Treasury on the FSLAB. The Standing Committee on Finance has invited public comments on the FSLAB. These comments must be submitted on or before 12h00 on Monday 17 May 2021 Comments must be submitted to the Committee Secretaries, Mr. Mr Allan Wicomb and Ms Teboho Sepanya (Standing Committee on Finance) at awicomb@parliament.gov.za or tsepanya@parliament.gov.za no later than 12:00 on Monday 17 May 2021.
The Pension Funds Amendment Bill
In response to the outbreak of the Covid-19 pandemic that has resulted in many South Africans becoming destitute, the legislature has published the Pension Funds Amendment Bill, 2020 (the Bill) proposed a significant amendment in respect of section 19 of the Pension Funds Act, 1956 (PFA), which deals with investments. Currently, section 19(5B) prohibits the granting of a loan to, or furnishing a guarantee in respect of, a member or making any of its funds available, whether by way of an investment or otherwise, to be utilised in any manner by the fund or someone else for a loan to a member or a guarantee on behalf of a member, other than in respect of immovable property. The proposed amendment seeks to change this position by the addition of a section 5BB, which if passed will permit a fund to "furnish a guarantee in favour of a person other than the fund in respect of a loan granted or to be granted by such other person to a member", provided that such guarantee does not "exceed 75 per cent of that member’s share in the value of the fund". In addition, it proposes that the rules of the respective fund read subject to prudential standards must specifically allow a fund to furnish a guarantee in respect of items that are not immovable property.
The object of the Bill thus seeks to amend the PFA in order to allow pension fund members to obtain a loan, secured by a guarantee from a registered pension fund, to alleviate financial pressure during an emergency such as the COVID-19 emergency or any other emergency similar to COVID-19. By enabling a member to access a pension-backed loan, that member will be able to leverage their pension fund investment prior to their retirement date, without eroding their provision for eventual retirement.
The Standing Committee on Finance has invited public comments on the proposed amendment. Comments must be submitted to the Committee Secretaries, Mr. Mr Allan Wicomb and Ms Teboho Sepanya (Standing Committee on Finance) at awicomb@parliament.gov.za or tsepanya@parliament.gov.za no later than 12:00 on Monday 17 May 2021.
