Government committed to transforming, developing financial services sector

The South African government remains unwaveringly committed to the development and transformation of the country’s financial services sector.

This was reiterated by Finance Deputy Minister David Masondo during a cocktail dinner of newly launched mutual bank, Young Women In Business Network, on Tuesday.

Masondo said government was committed to continuously introduce reforms that would assist the broader financial services sector to be able to grow and contribute positively and sustainably towards the inclusive growth of the economy.

In his speech, the Deputy Minister stressed the importance of regulated institutions at all times ensuring that they avoid the pitfalls that have led to the failure of some banking institutions in South Africa.

Masondo said regulated institutions “must also adhere to the directives of their regulators”. The regulators are mainly the Prudential Authority, the FSCA, the South African Reserve Bank, the Financial Intelligence Centre and the National Credit Regulator.

“It is vital that banks are managed prudently at all times to ensure that member deposits are protected. When Saambou Bank was placed under curatorship by the Minister of Finance in September 2002, it was against the backdrop of it having been managed in a reckless manner,” he said.

In August 2014, the then Finance Minister placed the African Bank under curatorship after the “reckless conduct of the bank’s affairs,” said the Deputy Minister.

Most recently, the VBS Mutual Bank was placed under curatorship in March 2018, on the backdrop of a severe liquidity crisis.

“Information in the public domain states that the audited financial statements of the Bank were fraudulently mis-stated, and it made it difficult for the then Registrar of Banks to ascertain VBS Mutual Bank’s correct financial position,” Masondo told guests.

He said it was important to highlight failures of these institution, saying it was his duty to remind the YWBN leadership, a new mutual bank, that running a bank is a huge responsibility which must never be taken lightly.

Turning his attention to the importance of ethical leadership in the banking and financial services sector, he said it was important to consider that financial institutions did not operate like ordinary companies but carry specific responsibilities towards the communities that they serve.

“The way people save and invest and how banks allocate capital between alternative uses brings critical economic and social consequences that cannot be ignored in favour of short-term profit goals.

“No doubt the 2008 global financial crises put focus on the issue of ethical leadership in banking and the financial services sector more broadly and increasingly advocates of ethical banking are getting increasing attention from policymakers.”

This, he said, was therefore a reminder that ethical and value-based leadership would be key to the success of this mutual bank.

The Deputy Minister said the country had made progress towards the development of South Africa’s Financial Inclusion Policy, with the publication of a draft policy paper titled “An Inclusive Financial Sector for All”.

“The draft policy paper cites extending access to financial services for Small Business as one of the three key pillars of financial inclusion and I believe that this mutual bank is going to play a very critical role in this regard,” he said.

While SMMEs and co-operatives were at the centre of accelerated economic growth and development of South Africa, he said it was critical to ensure that barriers to entry were broken to ensure that their growth potential was realised.

“These barriers to entry include skills, finance, technology and the market. We are certain that the Mutual Bank will be the hammer to break the finance barrier to enable the businesses to grow our economy.

“But I also wanted to remind you of the huge responsibility you are taking on with regards to the establishment of this bank, as well as the critical role it will play in our economy by supporting the growth and development of SMMEs. Furthermore, let us not discount the critical need for value-based leadership,” said Masondo.