Banking sector reforms a scary maze
Education will be needed for accountants, lawyers and corporate executives
NAVIGATING the murky waters of banking sector reform is not for the fainthearted. So I did what most advisers are probably inclined to do when they can’t see the wood for the trees — ask. I put a call in to the Reserve Bank’s regulation department a few days ago to check up on progress and was pleased to hear that the unit is working hard to ensure SA’s banking system remains one of the most sound in the world despite the recent wobble caused by the failure of African Bank.
The only problem is that banking advisers and lawyers are being inundated with a tome of new regulations, amended regulations and regular guidance notes and circulars as the latest framework is feverishly worked on. Refining the ideal banking model is clearly a laborious exercise and the lurking question is whether an ideal solution can ever be found. Is it really possible to regulate your way out of a crisis when throughout history markets have proven to be amorphous beasts? They tend to move in animalistic cycles where either the bulls win the battle for capital, or the bears do. In between is a lot of volatility too — but money is generally made. A banking crisis, though is the end game to it all and this is the main reason for such a desire to prevent another banking-led crisis from happening — to alleviate the pain, as it were, while the instincts of the markets grease the wheels of the competitive market.
The good news is the South African Reserve Bank is more than willing to help banks and their advisers understand what is going on and even more time will be made available for education. Clearly, a lot of education will be needed for accountants, lawyers and corporate executives.
Essentially, the entire system is being recalibrated to ensure more safety valves are in place when con- ditions get tough — as they did in 2008-09 when a recession was sparked by poor banking practices and oversight — a lapse for which global economies, SA included, continue to suffer. Just when SA thought it was not going to face a failure, along came the crash and burn of African Bank’s unsecured lending model last year.
The average lawyer being asked by a corporate client to advise on these things faces a difficult challenge — some countries are taking it more seriously than others. The banks themselves are far closer to the process as they are effectively living and breathing it and a trend that is now