SA banks ‘on course’ to meeting Basel targets

SA was on course to comply with revised Basel 3 capital and liquidity rules which would be phased in from January until 2019, deputy governor of the South African Reserve Bank, Daniel Mminele, said yesterday.

Basel rules were being strengthened to fortify the balance sheets of banks in the hope of minimising the effects of another financial crisis similar or worse than that experienced in 2008-09.

Mr Mminele said in a speech in Sandton that steps had already been taken to ensure that banks would be able to comply with the liquidity coverage ratio by next year.

This was after the Reserve Bank created a standby liquidity facility for banks to plug any shortfalls that they may experience.

South African banks already meet the minimum Basel 3 capital requirements, but would not be able to comply with the liquidity coverage ratio which required them to have ready access to liquidity to plug shortfalls from a hypothetical run on a bank over a three-day period without government assistance.

Addressing delegates attending a conference on financial markets after the recent credit crisis organised by the Gordon Institute of Business Science, Mr Mminele said even though local banks had weathered the last crisis, the country still needed to further strengthen the sector.

SA had already published a policy document on how to make the financial sector safer by separating the market conduct activities under the Financial Services Board from prudential regulation which would be managed by the Reserve Bank.

Insurers would also not be spared and were expected to increase capital buffers under the solvency management rules similar to those being adopted by European peers.

Recently, the government also published proposals to regulate the hedge fund sector.

Mr Mminele said a co-ordinated approach was needed by global regulators to make the financial sector safer. “A co-ordinated approach by regulators is thus imperative to ensure that the swing does not move to over-regulation, based on the experience of only one, thereby having detrimental effects or even introducing systemic risk in other jurisdictions,” he said.