National Treasury Presentation to the Portfolio Committee on Communications on the Postbank Bill National Treasury

Contents Treasury Objectives Treasury Strategy Global Financial Crisis Forms of Regulation Need for Regulation Corporatisation Postal Infrastructure Inter-departmental Committee on corporatisation Guidelines to the Bill End

Treasury Objectives Enhancing competition and stability in the financial sector Promoting financial access, especially, to the poor Enhancing transformation in the financial sector

Treasury Strategy Fostering community based financial institutions in terms of the Co-operatives Banks Development Act, Financial Sector Charter process and the resultant Mzansi account, Banking Inquiry initiative Legislation for the development of the 2nd tier of banks (Dedicated Banks Bill)

The Global Financial Crisis The financial crisis has reinforced the need for adequate supervision and regulation of financial institutions Weak institutions can destabilise the financial system & their economies Therefore, all financial institutions MUST be regulated Postbank Not regulated

Forms of Regulation Prudential regulation Capital, assets, management, earnings, liquidity and solvency per institution and at the macro-level Market conduct Pricing and other consumer protection issues

Need for Regulation Regulation and licensing ensure that, amongst other things, the regulator is satisfied that: the business the applicant proposes to conduct is that of a bank the business of the bank will be conducted in a prudent manner the establishment of the bank will be in the public interest the applicant will be able to establish itself successfully as a bank the applicant will have the financial means to comply with the banking legislation

Corporatisation The White Paper on Postal Policy (1998) envisaged the Postbank as a viable vehicle for providing banking services to low-income groups & the rural poor in SA Commercial banks had a low penetration rate in the provision of banking services to low-income groups & the rural poor As of Dec 2009, 59% of the adult population had a basic bank account

Postal Infrastructure Meanwhile, the Post Office has an infrastructure which reaches deep into rural areas It is felt that the Postbank should take advantage of the Post Office’s wide outreach The need for restructuring also got momentum when postal operations of the Post Office were loss-making around 2000/01 To fund these losses, the Post Office utilised depositor funds in the custody of the Postbank As a result, the Post Office was recapitalised to the tune of R750m in 2003/4 It thus became important to “ring-fence” depositor funds from the rest of SAPO operations

Interdepartmental Committee In 2005, the Ministers of Finance & Communications agreed on the vision for the restructuring of the Postbank They further agreed that their respective departments shall work jointly to manage the corporatisation process This led to the formation of an interdepartmental committee which comprises staff from the Treasury, DOC, SAPO and the SARB This Bill is an outcome of the deliberations of the interdepartmental committee The interdepartmental committee is also facilitating the designation of the Postbank as a payment system participant

Guidelines to the Bill The purpose of this Bill is to give effect to an internal restructuring of SAPO, i.e. converting a division into a corporate entity Corporatised entity to assume current business of the Postbank division of SAPO, namely: Deposit taking Money transfer Third party payment Provision is made for the corporatised entity to apply for a licence to operate as a bank (See section 4 of the Bill) Meanwhile, the Treasury is also working on legislation for 2nd tier banks, which may be more suitable for the Postbank & Ithala

Guidelines (cont…) The corporatised entity shall be owned by SAPO New business of the corporatised entity shall be determined in terms of its banking licence Possibly to include lending Provision is also made for the corporatised/ licensed Postbank to be supervised & regulated by the Registrar of Banks

END THANK YOU!!!