Standard Bank Debt Intervention Proposal February 2018 Credit Risk Head of Personal and Business Banking South Africa: Thabani Ndwandwe

Standard Bank believes that Africa is our home and we drive her growth. As an organisation, we are committed to the call of “Improving lives and fulfilling aspirations across Africa”. We also believe that it is our duty to: We take the issues of consumer over-indebtedness and financial vulnerability seriously. As a bank in, for and across Africa, it is important to us that we contribute to crafting sustainable solutions to address these challenges. Introduction Responsibly grant debt that is affordable for the consumer Promote a culture of consumer financial responsibility Promote a culture of saving Responsibly and sustainably assist the consumer in times of need.

Overview of the presentation View on the draft bill Proposed solutions to curb over-indebtedness Existing remedies for over-indebtedness Conclusion

View on the Draft Bill

Concerns Standard Bank agrees that there is a great need to solve for over-indebtedness in South Africa. We are however, concerned that the bill, as it stands, may have long-term implications and not sustainably solve over indebtedness, particularly for the most vulnerable. Our concerns include the following: A deterioration in the culture of loan repayment Impeded prudential obligations: If banks are not able to ensure repayment on loans, then depositor’s money is at risk Loans being subject to tighter controls & an increase in the cost of credit Decrease in financial inclusion

Proposed solutions to curb over-indebtedness

Reform existing debt intervention mechanisms for a sustainable solution Effectively address reckless lending Ensure that the NCA is adequately enforced Ensure the NCR is granted the necessary powers and resources to ensure that all consumers benefit from the protections already contained in the law Debt Review Cover the cost of debt review on behalf of the poor consumer Debt Counseling Rules System (DCRS) Adopt DCRS as a compulsory system for all credit providers Improve some of the inefficiencies in the system Standardise voluntary debt relief measures across the credit industry The existing, bespoke mechanisms across the industry should be investigated for consideration of best-practice, with a view of applying them to the broader industry Ability to identify debts/customers that have received relief to avoid further indebtedness

Reform existing debt intervention mechanisms for a sustainable solution Understanding the behavioural aspect of over-indebtedness and a focus on early identification Creating efficient ways for monitoring customers to check for the early identification of distress Insurance claim processes Improve claim process Waive technical conditions that lead to lapses for low-income customers where education is weak Interventions to grow individual income/wealth Ensuring flexibility of the repayment of student loans Cultivation of entrepreneurship

Existing remedies for over-indebtedness

Current legislated remedies and limitations We do acknowledge that there is a need for a more inclusive process that is cost effective for low income consumers… INSOLVENCY / SEQUESTRATION ADMINSTRATION ORDER DEBT REVIEW

Current solutions offered by the Bank … As a result, over and above the legislated solutions, Standard Bank offers the solutions below: 6 months reprieve on student loans post completion of studies 3 month payment break for unemployed consumers whilst looking for a job Payment Moratoriums/ Payment breaks Term extensions Interest rate concessions Arrears forgiveness Suspension of monthly fees /charges Restructures Rates concessions and a lower single instalment (creating surplus for living expenses) Debt Consolidation Helps to realize more equitable proceeds than in an Auction process For downgrading of assets to create affordability (VAF) Bank assisted sale of property Full balance write down for balances less than R1,000 Up to 20% discounted settlements for unemployed consumers who have received lump sum payouts Up to 30% discounted settlements for special circumstances (unemployed / medically on boarded / consumers reaching pensionable age) Settlements in special circumstances Partial balance write down

Conclusion

Conclusion Persistent over-indebtedness is unsustainable and contributes to negative social and economic outcomes. It is bad for consumers, for business as well as for the economy. It is essential that the needs of the most vulnerable over-indebted people are addressed. Solutions to this problem must be sustainable and be able to meet the needs of this group of people in the long term. All the proposed initiatives are dedicated to helping the vulnerable and those negatively affected by the current economic situation. In finding the appropriate solutions for over indebtedness, we should be cognisant of laws that will increase the financial exclusion of consumers in the long run; further marginalizing low-income consumers and increasing the cost of borrowing. As an organisation, we believe that reckless lending and unscrupulous practices should be dealt with through the reinforcement of existing laws. Standard Bank requests that we do not introduce new legislation to deal with illegal lending practices that are already legislated for but rather be tougher on enforcement. The addition of another law will not provide an integrated approach to resolving the issue of over indebtedness.

Thank You