Mutual Bank Law Bolstered

SARB: Vows to Increase Regulation to Ensure Compliance with Legislation

- Adriaan Kruger

The South African Reserve Bank's (Sarb) Prudential Authority (PA) has vowed to increase its regulation over mutual banks, as well as other banks that do not comply with legislation.

It will start a consultation process of proposed new standards and regulations relating to mutual banks within the next few months.

Nomfundo Tshazibana, deputy governor of the Sarb and CEO of the PA, says this has become necessary due to the growth of mutual banks and because existing regulations do not address all the issues.

"To ensure that our regulatory and supervisory framework remains fit for purpose, the PA has developed seven prudential standards for mutual banks."

A prudent move

"These standards cover governance and risk management, operational risk management, credit risk, liquidity risk, interest rate risk in the banking book, capital and economic returns," she says.

The figures show that it's a prudent move.

Data published by the PA in its latest annual report for the year to March discloses that the banking sector's impaired advances grew by 3.4% to R308 billion, equal to 5.3% of the total advances of R8 231 billion.

While mutual banks are very small in the banking sector, with total assets worth less than R4.2 billion, the impaired loans as a percentage of total advances sit at 12.8%.