Two articles this weekend caught my attention. Both discussed the future of the FSC (Financial Sector Charter) and both intimated that it still has a life. I am a major fan of the FSC – without it the unbanked will remain unbanked, the uninsured will remain uncatered for and banks will make up ED points under procurement.
The ownership debate is still stuck in the mud. The Fin24 article puts the issue across very clearly
At the centre of the rift is a coalition of 50 civil society organisations led by labour federation Cosatu and its close ally, the SA Communist Party, which are demanding that the charter not be gazetted if it fails to comply with the code's black direct ownership target of 15%. On the other hand, financial sector trade associations led by the Banking Association of SA (Basa) and the Association for Savings & Investment SA (Asisa) want the charter to be gazetted with a black ownership target of 10% - a level agreed on when the charter was adopted in 2003. The push towards the 15% ownership level could open the door for other black entrepreneurs or for existing black shareholders to increase their stakes, but funding these transactions has been a serious challenge.
I have blogged about this before and to my mind there is a statute that stands in the way of 15% black ownership (and I quote myself)
The reason why the FSC limited (ownership) to 10% is because of the Banks Act most specifically section 37. I'm not going to summarise it but you can find it on pages 36-8. The FM gave us a good summary of section 37
Section 37 of the Banks Act was designed to ensure the sustainability of SA's banks through the regulation of anchor investors in banking institutions. Any entity which seeks to acquire a minimum of 15% of an SA bank has to be vetted by the registrar of banks, a division of the SA Reserve Bank. Such investors become shareholders of reference and need healthy balance sheets to back up the banks in times of trouble.
And yet the chief mediator, Modise Motloba, has said
"We will not gazette a charter that flies in the face of transformation. At worst it must meet the targets of the codes or at best exceed them"
And this is what I don't get – if there is a statutory stumbling block then why aren't we hearing how the Banks Act is going to be amended. We would have picked this up on PMG and the financial press would have been screaming about it.
I think that if the FSC is to make its section 9 gazetting then the current status quo will remain. Stuart Theobald, who wrote a very interesting article on the FSC in this Sunday's newspaper, agrees with me. I did find his reference to once-empowered, always empowered the most interesting
The second issue concerns the "once-empowered, always empowered" provision of the charter. The codes are less accommodating of such a principle, which allows banks to continue to claim ownership points even if black shareholders sell their shares. Community groups and labour are dead against it. (They predictably would be)
Hmm – perhaps the resolution of the FSC will shed some proper light on how this principle actually is supposed to work. See my post on the subject from a week ago.
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