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South African Postbank Bill [B14-2010] (DOC and NT) 24 August 2010 PCC

This document discusses the South African Postbank Bill and its amendments to encourage savings, differentiate from commercial banks, and promote lending to rural and lower-income markets.

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South African Postbank Bill [B14-2010] (DOC and NT) 24 August 2010 PCC

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  1. South African Postbank Bill [B14-2010] (DOC and NT) 24 August 2010PCC Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  2. Delegation DOC Team • Willie Vukela : Director • Alf Wiltz : Director Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  3. Delegation National Treasury Team • Omega Shelembe : Acting Chief Director • Jeanine Bednar-Giyose : Director • Alvinah Thela Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  4. Background • During its informal deliberations on the 17 August 2010, the PCC further raised the following issues to be included in the Bill, ie. • Lending, borrowing and investment powers of the Bank must be clearly provided for throughout the Act such as in the Objects of Act, Powers and duties, Funds of Company etc Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  5. Background • Postbank needs to be further differentiated from commercial bank • The Bill must be revised to ensure that the Company will cater for the poor • Ministerial power to intervene required • The Minister’s policy making power must be subject to public consultation, concurrence of the Minister of Finance and involvement of the National Assembly Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  6. Definition • A definition has been inserted for family member due to its use in clause 16. • "family member" in relation to any person, means his or her parent, siblings, child, including an adopted child, or spouse (whether by statutory, customary or religious law), including a person living with that person as if they were married to each other Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  7. Definition • The definition of “business of a bank” has been re-inserted since it is used in clause 2(a). This amendment follows the concession by National Treasury that reference to the Banks Act is in order at this stage Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  8. Object of the Act • Clause 2(a) has been amended to replace “banking business” with “the business of a bank”. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  9. Object of the Act • “2. The object of this Act is to provide for the incorporation of the Postbank Division of the Post Office as a legal person with the aim of— • (a) conducting the business of a bank that will encourage and attract savings amongst the people of the Republic;” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  10. Lending • Clause 4(4) has been further amended to change the requirement that the Company shall not “expand its current business activities” until it is registered as a bank • It now provides that the Company shall not “expand the scope of its banking activities” until it is registered as a bank • The former wording may prevent the Postbank from expanding ordinary business that is not intended Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  11. Lending • A new clause 2(f) on the object has been inserted to specifically provide that the aim of the Postbank includes lending to rural and lower income markets Wording for 2(f) ensuring lending to rural and lower income markets Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  12. Lending • A new clause 9(4) has been inserted to provide that the Company may only lend in accordance with policy determined by the Minister in terms of section 25(2) (re-numbered as 26(2)) • 9(4) The Company may only lend in accordance with policy determined by the Minister in terms of section 26(2). Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  13. Borrowing • A new clause 9(1)(h) has been inserted to ensure that the Postbank can only borrow money subject to the approval of the Minister, with the concurrence of the Minister of Finance • 9(1)(h) borrow money other than for temporary interbank borrowing, subject to the approval of the Minister, with the concurrence of the Minister of Finance Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  14. Investment • Clause 9(1)(e) has been amended to ensure that the Postbank can only invest money in accordance with an investment policy approved by the Minister, with the concurrence of the Minister of Finance. • 9(1)(e) subject to section 4(6),invest money in accordance with an investment policy approved by the Minister, with the concurrence of the Minister of Finance Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  15. Investment • Investing money has also been made subject to the new clause 4(6) that provides that the Postbank shall only invest the money deposited with it in liquid assets, as defined in the Banks Act, until such time that the Company is registered as a bank Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  16. Investment Clause 4(6) • 4(6) Until such time that the Company is registered as a bank, the Company shall invest the money deposited with it in liquid assets only, as defined in the Banks Act Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  17. Amendment Differentiation from commercial bank • In addition to the existing provisions in clause 2 that differentiate the Postbank from commercial banks, a new clause 2(f) has been inserted to specifically provide that the aim of the Postbank includes lending to rural and lower income markets Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  18. Amendment The Minister’s policy making power must be subject to public consultation for a period of at least 60 days, concurrence of the Minister of Finance  and involvement of the National Assembly- • The amendment has been made to clause 25(2) (re- numbered 26(2)) Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  19. Amendment • The new clause ensures that the public is consulted through a notice and comment procedure in the gazette, for at least 60 days • The concurrence of the Minister of Finance is required and the policy must be submitted to the National Assembly • The final policy should then be gazetted Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  20. Amendment • The new clause 25(2)(b) as previously proposed, which provides that any decision taken by the Board which is in conflict with a policy made by the Minister is of no force and effect, has been moved to clause 9(3)(b) Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  21. Amendment Ministerial power to intervene required • To enable intervention by the Minister, a new clause 25 has been inserted • Clauses 26 to 30 were subsequently renumbered and cross-references corrected Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  22. Intervention by Minister • 25 (1) The Minister may, with the concurrence of the Minister of Finance, direct the Company to take any action specified by the Minister if the Company— • (a) is being mismanaged; • (b) fails to perform its functions effectively or efficiently • (c) has acted unfairly or in a discriminatory or inequitable way towards a person to whom it owes a duty under this Act; or • (d) has failed to comply with any law. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  23. Intervention by Minister • (2) A directive contemplated in subsection (1) must state— • (a) the nature of the deficiency; • (b) the steps which must be taken to remedy the situation; and • (c) a reasonable period within which the steps contemplated in paragraph (b) must be taken Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  24. Intervention by Minister • (3) If the Company fails to remedy the situation within the stated period, the Minister may, with the concurrence of the Minister of Finance— • (a) after having given the Company a reasonable opportunity to be heard; and Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  25. Intervention by Minister • (b) after having afforded the Company a hearing on any submissions received, replace the members of the Board in the same manner as the departing members have been appointed or, where circumstances so require, appoint a person as an administrator to take over the relevant function of the Company. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  26. Intervention by Minister • (4) If the Minister appoints an administrator in terms of subsection (3)— • (a) the administrator may do anything which the Company might otherwise be empowered or required to do by or under this Act, to the exclusion of the Company; • (b) the Board may not, while the administrator is responsible for the relevant function, exercise any of its powers or perform any of its duties relating to that function; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  27. Intervention by Minister • (c) an employee or a contractor of the Company must comply with a directive given by the administrator • (5) Once the Minister is satisfied that the Company is able to perform its functions effectively, the Minister must terminate the appointment of the administrator Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  28. Intervention by Minister • (6) (a) Notwithstanding subsection (3), the Minister may dissolve the Board if the Minister, on good cause shown, looses confidence in the ability of the Board to perform its functions effectively and efficiently. • (b) The Minister may exercise the power only— • (i) after having given the Board a reasonable opportunity to be heard; and • (ii) after having afforded the Board a hearing on any submissions received. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  29. Intervention by Minister • (c) If the Minister dissolves the Board, the Minister— • (i) may appoint an administrator to take over the functions of the Board and to do anything which the Board might otherwise be empowered or required to do by or under this Act, subject to such conditions as the Minister may determine; and • (ii) must, as soon as it is feasible but not later than three months after the dissolution of the Board, replace the members of the Board in the same way as they were appointed. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  30. Intervention by Minister • (7) The costs associated with the appointment of an administrator shall be for the account of the Company Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  31. Clause 3 Incorporation • Section 32 of the Companies Act provides that a public company must at least have seven members while the Postbank will have only one i.e. the Post Office. At the same time section 37 of the Banks Act provides that a shareholder in a bank cannot hold more than 15% of the shares, while SAPO will be the sole shareholder in the Postbank. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  32. Clause 3 Incorporation • The PCC therefore at the request of the Post Office, agreed to include the following wording at the beginning of clause 3(2) “Notwithstanding section 32 of the Companies Act and section 37 of the Banks Act,the Post Office shall, upon incorporation of the Company, be the sole member and shareholder of the Company.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  33. Clause 4 Registration as Bank • Clause 4(1) and 4(2) have been amended and is now the same as initially introduced in Parliament. • Clause 4(3) has been amended to remove the reference to “other applicable legislation”, being the indirect reference to the Dedicated Banks Bill that is not necessary anymore. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  34. Clause 4 Registration as Bank • “4(1) Notwithstanding section 15 of the Banks Act, the Company must be regarded as having been authorised to form a company in terms of the Companies Act. • (2) The Company must be registered as a bank after it has satisfied the requirements of the Banks Act.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  35. Clause 4 Registration as Bank • (3) Notwithstanding section 43 of the Banks Act, the Post Office is not required to register as a controlling company of the Company, and the appointment of the Board of the Post Office is not subject to the approval of the Registrar of Banks Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  36. New Clause 4(4)- 4(6) Registration as Bank New clauses 4(4) to 4(6) as recommended by NT have been inserted as follows:- • “4(4) The Company shall not expand its current business activities until it is registered as a bank in terms of the Banks Act, and any such additional business activity is approved by the Registrar of Banks.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  37. New Clause 4(4)- 4(6) Registration as Bank • “4(5) In approving any additional business activity as contemplated in subsection (4), the Registrar of Banks shall take into account the objects of this Act and any policy made by the Minister in terms of section 26(2). • 4(6) Until such time that the Company is registered as a bank, the Company shall invest the money deposited with it in liquid assets only, as defined in the Banks Act.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  38. New Clause 4(4)- 4(6) Registration as Bank • The wording “expand its current business activities” in clause 4(4) have subsequently been changed to “expand the scope of its current banking activities”. The reference to clause 25(2) has also changed to 26(2) due to re-numbering Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  39. Clause 8 Exemption from tax liability • Clause 8 titled “Value of business of former Postbank for purposes of finance laws” has been deleted in its entirety. It has been replaced by a new clause titled “Exemption from tax liability”. It now provides that “The transfer of the business of the former Postbank, referred to in section 7, attracts no tax liability of whatever nature.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  40. Clause 12 Composition of Board • Clause 12(3) has been amended to insert “non-executive” in sub-clause (a) and (b). • A new sub-clause 12(3)(c) has been added to provide for continuity in the Board as follows:- • “12(3)(c) The Minister must appoint at least five members of the first Board of the Company for a period not exceeding three years.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  41. Clause 13 Persons disqualified from membership of Board • The following sub-clause 13(1)(g) has been added:- • “13(1) No person may be appointed as a Board member or remain a member of the Board if he or she —(g) has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  42. Clause 13 Persons disqualified from membership of Board • The following sub-clause 13(2) has been added:- • “(2) A person who is subject to a disqualification contemplated in subsection 13(1)(a), 13(1)(b) or 13(1)(g) may be nominated for appointment as a Board member, but may only be appointed if at the time of such appointment he or she is no longer subject to that disqualification.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  43. Clause 14 Appointment of members of Board • Clause 14 has been amended by the addition of sub-clause 14(8)(b) to provide for the filling of vacancies occurring in the Board and the period that a member appointed to fill a vacancy holds office, as follows:- • “14(8)(b)  Any member appointed under this subsection holds office for the rest of the period of the predecessor’s term of office, unless the Minister directs that such member holds office for a longer period which may not exceed one subsequent term of up to five years.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  44. Clause 15 Resignation, removal from office and vacating of office • Clause 15(2)(d) has been amended to replace the reference to “applicable legislation” with the “Banks Act” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  45. Clause 15 Resignation, removal from office and vacating of office • 15(2)(d) the Registrar of Banks has, after complying with relevant provisions in the Banks Actproviding for the removal of such a board member, informed the Minister that the member is no longer a fit and proper person to hold that appointment, or that it is not in the public interest that such member of the Board continues to hold such appointment; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  46. Interests of Board members • The PCC has requested that members’ interest must be catered for to ensure the following:- • disqualification if a member has a direct or indirect interest which could reasonably be expected to compromise the Board (new clause 13(1)(g)); • 13(1)(g) has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  47. Interests of Board members • prohibition on doing business with Company (clause 16(1)(d));- • 16(1)(d) a member of the Board or an organisation or enterprise in which a member of the Board has an interest contemplated in this section may not offer its goods or services to the Company or conclude any business with the Company. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  48. Interests of Board members • may not attend meetings of Board in which that member has an interest (clause 16(1)(b)) • 16(1)(b) a member of the Board may not be present, or take part in, the discussion of or the taking of a decision on any matter before the Board in which that member or his or her family member, life partner, business partner or associate has a direct or indirect [financial] interest; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  49. Interests of Board members • “Financial interest” has been amended to “any interest” in clauses 13(1)(g), 14(4)(e) and 16(1)(a),(b) and (d) respectively. • 13(1)(g) has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

  50. Interests of Board members • 14(4)(e) whether that candidate has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

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