The Treasury of South Africa is planning to bring in new banking laws to improve the governance and regulation of the financial sector. This comes as the South African Reserve Bank (SARB) faces mounting criticism over its inaction on the rising inflation and unemployment in the country.
New banking laws to enhance investor protection and financial stability
According to the Treasury, the new banking laws will amend the Banking Regulation Act, the Banking Companies Act and the Reserve Bank of India Act. The aim is to enhance the protection of investors and depositors, as well as to strengthen the oversight and supervision of banks and other financial institutions. The Treasury said that the new laws will also align with the international best practices and standards for banking regulation.
The Treasury added that the new banking laws will be drafted in consultation with the SARB, the Financial Sector Conduct Authority (FSCA), the Prudential Authority (PA) and other relevant stakeholders. The Treasury expects to table the new banking laws in Parliament by the end of the year.
SARB under fire for failing to curb inflation and boost growth
The announcement of the new banking laws comes as the SARB faces increasing pressure from various quarters to take more decisive action to address the economic challenges facing South Africa. The SARB has been accused of being too cautious and conservative in its monetary policy, which has kept the repo rate unchanged at 3.5% since July 2020.
Critics of the SARB argue that the central bank should cut the repo rate further to stimulate the economy, which contracted by 7% in 2020 due to the Covid-19 pandemic and the lockdown measures. They also contend that the SARB should adopt a more flexible and proactive approach to inflation targeting, which is currently set at 3-6%.
The SARB, however, has defended its stance, saying that it has done enough to support the economy and that lowering the repo rate further would have little impact on growth. The SARB has also maintained that it is committed to its inflation mandate, which is essential for preserving the value of the currency and the purchasing power of consumers.
Treasury and SARB to work together to foster economic recovery
Despite the differences in opinion, the Treasury and the SARB have expressed their willingness to work together to foster a sustainable and inclusive economic recovery. The Treasury said that it appreciates the independence and autonomy of the SARB, which is enshrined in the Constitution. The Treasury also said that it supports the SARB’s efforts to maintain price and financial stability, which are conducive for growth and investment.
The SARB, on the other hand, said that it welcomes the Treasury’s initiative to introduce new banking laws, which will enhance the regulatory framework and the resilience of the financial sector. The SARB also said that it will continue to collaborate with the Treasury and other authorities to implement the structural reforms and fiscal consolidation measures that are necessary to boost the potential output and the confidence of the economy.
