Banks fined R46.5m for weak controls
Anti money-laundering rules not followed
THE South African Reserve Bank last year imposed administrative fines amounting to R46.5 million on seven banks for several transgressions including for weak anti-money laundering control, the Bank’s deputy governor and Registrar of Banks said yesterday.
The Financial Intelligence Centre Act mandates the Reserve Bank to impose an administrative sanction for failure to comply with the Act.
Speaking at the release of the bank supervision report for the year ended December last year, Kuben Naidoo said the Reserve Bank had fined Absa, GBS Mutual Bank, Habib Overseas Bank, Investec Bank, Societe Generale Johannesburg Branch, Standard Chartered Bank Johannesburg Branch and the South African Bank of Athens for non-compliance with the provisions of the Financial Intelligence Centre Act.
The fines ranged between R500 000 and R20m. In addition, the Bank either reprimanded the banks or directed them to take remedial action.
The Bank said the administrative sanctions were not based on evidence that the banks had facilitated transactions relating to money laundering or financing terrorism.
Naidoo said its role in the implementation of the Financial Intelligence Act did not overlap with that of the Financial Intelligence Centre. “We are not the Financial Intelligence Centre. We do not have a mandate to investigate specific people or specifics acts or events. We do not have investigative powers. Our job is to ensure that the banks have the systems, procedures and methods to comply with the Act,” he said.
Meanwhile, Naidoo said all of South Africa’s major banks could withstand a significant shock in the case of another sovereign credit downgrade because they had adequate capital and high liquidity ratios.
South African Reserve Bank slaps administrative penalty on seven major banks
“Of course they cannot manage a complete economic collapse. (But) nobody is forecasting a complete economic collapse of the scale we have seen in Venezuela or Zimbabwe 16 or 17 years ago.
“Certainly a major credit downgrade, even a local currency downgrade, will be very negative for the economy.
“But we think the banks will survive that. In South Africa we can be confident and comfortable that it is highly unlikely the banks could be the epicentre of the problem. The problems may come from somewhere else... Whereas the global financial crisis, the source of that was in the financial sector,” he said.
The Reserve Bank said, while the operating environment for South African households and corporates had remained challenging over the past year, the South African banking sector was healthy and adequately capitalised.
Seven of the domestic banks were downgraded to sub-investment grade in line with the country’s sovereign credit rating downgrade. All South African banks, however, were last year subjected to a common scenario stress test, which indicated that South African banks could withstand significant adverse scenarios. The resilience of banks stems from the high capital and liquidity buffers that are held.
He said amid rising unemployment and weak economic growth, the banks had proven to be resilient.
“The banks have not had significant increases in bad and non-performing loans. I think that is a great strength. But there is also an element of weakness in that statistic. What the banks have done is that they have improved credit quality. They have lent to fewer people. What it means is that we have a very weak credit extension. There lies an element of concern in that sense,” said Naidoo.
He said South African banks had increased capital adequacy levels and improved liquidity coverage.
“Banks’ balance sheets have continued to show selective and muted growth in loans and advances as well as deposit taking, while equity has grown conservatively,” said Naidoo.