Closure of accounts ‘must be explained’
The National Assembly’s standing committee on finance has endorsed a National Council of Provinces amendment to the Financial Sector Regulation Bill that might require banks and other financial institutions to give reasons for the termination of products such as the closure of bank accounts.
The National Assembly’s standing committee of finance has endorsed a National Council of Provinces amendment to the Financial Sector Regulation Bill to require banks and other financial institutions to give reasons for termination of products such as the closure of bank accounts.
The issue came to the fore last year with the contentious closure of Gupta bank accounts by four major banks after they detected a number of suspicious transactions.
However, members of the standing committee of finance stressed that their endorsement of the council’s amendment had nothing to do with the Gupta matter, but was made because it was a sound move.
Treasury deputy directorgeneral Ismail Momoniat said at the meeting of the finance committee yesterday that the Treasury also supported the amendment as it would enhance customer protection.
Many other countries had enacted similar rights of customers, Momoniat said.
“We think that at least the customer should be given reasons as to why the account is being closed.” He said that the industry was not opposed to such a provision.
Committee member Thandi Tobias said the amendment to the bill could protect the vulnerable and was not motivated “by a specific event”. Former tourism minister Derek Hanekom also supported the amended provision, noting that it was not prescriptive or binding but merely gave the Financial Sector Conduct Authority the option of setting standards on the matter.
The Financial Sector Regulation Bill will give effect to the twin-peaks system of financial regulation, leading to the separation of prudential regulation of financial institutions from regulation of market conduct.
In terms of the amendment adopted by the National Council of Provinces select committee, the Financial Sector Conduct Authority will be able at its discretion to lay down rules for financial institutions to follow in refusing, withdrawing or closing financial products or financial services.
The authority will also determine the disclosures that have to be made to the customers and could oblige the financial institution to report any refusal, withdrawal or closure of a product or service to the financial sector regulator.
In terms of the amendment, the standards set by the authority will have to take into consideration international standards and practices and be subject to the requirements of the Financial Intelligence Centre Act and other the laws governing the financial sector.