Committee urges tighter SA bank rules

JOHANNESBURG – South African banks may face tighter regulation after an official report called for more competition and disclosure in the sector, a source familiar with the report said yesterday.

The government should consider proposals to increase banks’ obligations to disclose costs and alter regulations to make it easier for foreign banks to enter the market, the source, who sat on the committee that prepared the report, told Reuters. The report, which officials said would go to finance minister Trevor Manuel by the end of the week, calls for the competition commission to investigate the possibility of a “complex monopoly” in the sector, he said.”In the United Kingdom, the competition commission could investigate complex monopolies in the banking sector,” he said.”It is not clear if that is the case here.It might require a legislative change.”South Africa’s banking sector is dominated by four key players – Standard Bank, ABSA, Nedcor and First Rand.A spokeswoman for the Banking Council said they would like to discuss with the government how to achieve the report’s objectives, “ideally without legislation”.A Treasury spokeswoman would not comment on the contents of the report.”It’s with the Treasury and we are looking at it,” said a Treasury spokeswoman.”We would pull out some of the recommendations and take it to the minister, but that hasn’t happened yet.”Micro Finance Regulatory Council chief executive Gabriel Davel, who also sat on the committee, said lower and middle-income consumers in South Africa lacked information on products and were often unclear on how concepts like interest operated.”The reality is that people think for interest on a consumer credit product they would be paying something like 23 per cent, but if you add other costs it can be as high as 100 per cent, even from the big suppliers,” he said.Complaints about banking costs frequently crop up on South African radio talk-shows, and an analyst at a major international bank said the negative publicity could hurt the sector.He said he was concerned the sector could end up over-regulated.-Nampa-ReutersThe report, which officials said would go to finance minister Trevor Manuel by the end of the week, calls for the competition commission to investigate the possibility of a “complex monopoly” in the sector, he said.”In the United Kingdom, the competition commission could investigate complex monopolies in the banking sector,” he said.”It is not clear if that is the case here.It might require a legislative change.”South Africa’s banking sector is dominated by four key players – Standard Bank, ABSA, Nedcor and First Rand.A spokeswoman for the Banking Council said they would like to discuss with the government how to achieve the report’s objectives, “ideally without legislation”.A Treasury spokeswoman would not comment on the contents of the report.”It’s with the Treasury and we are looking at it,” said a Treasury spokeswoman.”We would pull out some of the recommendations and take it to the minister, but that hasn’t happened yet.”Micro Finance Regulatory Council chief executive Gabriel Davel, who also sat on the committee, said lower and middle-income consumers in South Africa lacked information on products and were often unclear on how concepts like interest operated.”The reality is that people think for interest on a consumer credit product they would be paying something like 23 per cent, but if you add other costs it can be as high as 100 per cent, even from the big suppliers,” he said.Complaints about banking costs frequently crop up on South African radio talk-shows, and an analyst at a major international bank said the negative publicity could hurt the sector.He said he was concerned the sector could end up over-regulated.-Nampa-Reuters