New era of local is lekker

GIVEN the global headwinds faced by the world’s leading banks, it is unlikely that Barclays Africa and Nedbank, two of South Africa’s big four, will have a dominant shareholder in the form of an international player.

That means a change of business for the South African Reserve Bank, accustomed to dealing with dominant shareholders such as Barclays plc on matters relating to banking stability and governance.

“It is true that global systemically important financial institutions are more reluctant to hold stakes in subsidiaries,” said Kuben Naidoo, the deputy governor and registrar of banks.

“Global regulation is making global banking harder. The regulations are designed to penalise size and complexity.”

The new regulatory environment and compliance requirements mean it does not make sense for an international bank such as Barclays plc to hold a controlling stake of a lender based outside its primary jurisdiction.

While Barclays’ decision to exit its African operations is a result of regulatory costs, Old Mutual’s decision to reduce its controlling stake in Nedbank to about 17% within the next two to three years is part of its restructuring. It was not necessary for a large listed bank to have a shareholder of reference, as well-functioning capital markets did substitute in some ways for the necessity of having a single dominant shareholder, said Naidoo.

“If a large bank does have a large shareholder, then we are obliged to ensure that the large shareholder meets fit and proper persons standards and complies with good governance practices,” he said. But, he said, “large banks are so large that if they need capital, no shareholder has lots of money sitting around doing nothing. They would have to raise capital on equity and other markets.”

Adrian Cloete, portfolio manager at PSG Wealth, said the lack of a single major shareholder among South African banks would not have any impact on the country’s strong banking system. —