Cabinet must reform the COFI Bill in order to protect the right to bank

THE Conduct of Financial Institutions (COFI) Bill, soon to be submitted to Cabinet, is a critical opportunity to address arbitrary bank account closures in South Africa. These closures threaten economic stability, undermine fairness, and grant banks unchecked power to act as de facto regulators of public and private life.

- PHILIPPA LARKIN

However, the Bill in its current form fails to adequately protect the right to bank. I urge parliamentarians to scrutinise this legislation and demand reforms that enshrine procedural fairness, as recommended by the Zondo Commission and grounded in the audi alteram partem principle.

Cabinet must address these shortcomings by ensuring the COFI Bill incorporates robust protections, including the right to a fair hearing, as recommended by the Zondo Commission and supported by the audi alteram partem principle.

The audi alteram partem rule, a cornerstone of natural justice, mandates that individuals be given an opportunity to respond to allegations before decisions are made against them. In the context of bank account closures, this principle is critical. Banks currently rely on the Code of Banking Practice, which only requires "sufficient notice" before termination. This vague standard fails to ensure procedural fairness, particularly for public figures, large-scale employers, or influential stakeholders whose account closures can have far-reaching consequences.

The Problem: Arbitrary Account Closures

South Africa's banking regulatory framework, including the Code of Banking Practice, allows banks to terminate accounts with minimal oversight. Banks often cite vague reasons like "reputational risk," a term so broad it invites abuse.

This practice has far-reaching consequences, particularly for public figures, employers, or influential stakeholders whose closures can disrupt businesses and livelihoods.

For example, Independent Media recently faced account closure threats based on flimsy reputational risk claims, while Nedbank, implicated in corruption by the Zondo Commission, faced no similar scrutiny. Such inconsistencies highlight the need for reform.