Report has it that the DA and EFF opposed the passage of the Financial Sector Regulation Bill in the National Assembly on Tuesday because it fails to include the National Credit Regulator (NCR)‚ among other things.
Apparently, the bill will overhaul the system of regulation of banks‚ insurance companies‚ retirement providers and other sectors of the industry.
It was adopted by the National Assembly on Tuesday after years of preparation by the Treasury and careful deliberation by Parliament’s standing committee on finance.
The bill provides for a “twin peaks” model of financial regulation, with the one pillar being financial conduct managed by one authority‚ which will replace the Financial Services Board‚ and the other prudential authority located in the Reserve Bank.
This replaces the existing system that divides regulation between the types of institutions supervised rather than the nature of the supervision itself.
The existing system was considered deficient as it did not effectively deal with financial sector conglomerates straddling different sectors of the financial services industry. This meant some activities fell through the cracks.
Deputy Finance Minister Mcebisi Jonas said the new law would promote financial inclusion‚ make it easier for consumers to understand financial products and allow the authorities to take decisive action to protect consumers.
But DA finance spokesman David Maynier, EFF MP Floyd Shivambu and the Inkatha Freedom Front were concerned about the bill’s failure to include the NCR‚ which now falls under the Department of Trade and Industry and is responsible for the regulation of the credit industry. They felt that it should fall under the supervision of the financial sector conduct authority.
This failure‚ Maynier stressed‚ would mean that the financial sector conduct authority would “be more or less toothless” when it came to the credit industry. This would compromise an important objective of the bill‚ which is to improve the co-ordination of the financial sector regulators, he said.
Maynier also had concerns about the constitutionality of the provision for warrantless searches, even though their scope and purpose had been narrowed after President Jacob Zuma referred the Financial Intelligence Centre Amendment Bill back to Parliament on these grounds.
Another concern of the DA was the excessive cost of implementing the reforms.
Maynier referred to an impact study that found the total cost of implementing the bill would be about R1.03-billion‚ with R341-million required by the prudential authority and R611-million by the market conduct authority.
He said this excluded “transitional costs” of about R150-million a year for two years that would be clawed back through a “special levy” following the introduction of a Financial Sector Levies Bill.
“The concern here is that not only are the costs excessive‚ but they will be passed on to customers‚ which could compromise another important objective of the bill‚ which is financial inclusion‚” he said.
Maynier hoped the National Council of Provinces would address what he regarded as the “defects” of the bill.
Jonas admitted that the cost of regulation could be onerous but said this was necessary to create an effective and efficient regulatory regime.
An analysis by the Treasury showed that the direct cost to industry would be minimal‚ although there would be indirect costs involved in companies becoming more consumer-focused. Jonas said a money bill would be introduced later‚ which would set out the costs involved.
Shivambu said the EFF did not support the “toothless” bill that needed to deal with financial crimes. Zuma was frustrating this by sending the Financial Intelligence Centre Act (Fica) bill back to Parliament.