Reserve Bank - Management, shareholding and control

The South African Reserve Bank Act, 1989 which provides for the establishment, control and management of the South African central bank - called the Reserve Bank of South Africa ("Reserve Bank") - has been amended by the South African Reserve Bank Amendment Act, 2010. Prior to the amendment, the management of the Reserve Bank was vested in a board of 14 individuals, half of which were appointed by the President of the Republic of South Africa and the other half by the shareholders of the Reserve Bank (i.e. the private sector). The position following the amendment Act is that management of the Reserve Bank is now vested in four individuals (a governor and three deputies) who are appointed by President of the Republic of South Africa. The role of the board has been reduced to administrative matters. The amendment is inconsistent with certain basic principles underlying the new Companies Act, 2008.

Exchange Control - Proposed administrative authority to forgive contraventions and impose fines

The Reserve Bank has announced that the Exchange Control Regulations, 1961 will be supplemented to include a new regulation 24 to authorise the National Treasury or any person appointed by the Treasury to forgive and "regularise" any contravention of the Exchange Control Regulations. In the draft regulation 24 it is contemplated that anyone that has breached the Exchange Control Regulations may apply to the applicable government official for the offence to be "regularised". This seems to involve retrospective approval of the act or omission which, but for the fact that it was not approved by the Reserve Bank under the Exchange Control Regulations, is a contravention of the regulations. The responsible government official is to be given authority to impose a fine - called a "levy" - as a condition for regularising the contravention. Provision is made that the "levy" must be paid out of foreign currency and that it may be increased if the applicant does not have foreign currency with which to pay. It seems that the amount of the levy will be determined by the relevant official on a case by case basis.

Companies Act and Consumer Protection Act - Implementation dates

The implementation date of the Companies Act, 2008 and the Consumer Protection Act, 2008 has been deferred to 1 April 2011 - this was announced per notice dated 28 September 2010 by the Department of Trade and Industry.

Long-term and Short-term Insurance - Draft regulations governing binder agreements

The Financial Services Board ("FSB") has published draft regulations governing binder agreements entered into by long-term and short term insurers. A binder agreement is an agreement entered into by an insurer with a third party in terms of which the third party is permitted to write and sometimes administer insurance policies for the insurer as if the third party is the insurer. The draft regulations relating to long-term insurers and the regulations relating to short term insurers are similar: They provide that types of counterparties with whom binder agreements may be concluded and set forth certain requirements, limitations and prohibitions relating to binder agreements. The draft regulations also deal with the basis on which the holders of binder agreements may be compensated and provide for certain reporting requirements.

Long-term and Short-term Insurance - FSB Directive on securities lending

FSB Directive 154.A.ii (LT&ST) issued pursuant to the Long-term Insurance Act, 1998 and the Short-term Insurance Act, 1998 deals with the treatment of securities lending transactions for prudential reporting purposes by long-term and short-term insurers and sets out certain standards of best practice for insurers in respect of securities loans. The directive specifies that securities loans should, for purposes of determining the financial soundness position, be treated as claims against the borrower and that, for spreading purposes, the loaned securities should be reported. The directive also specifies that securities should only be lent to pre-approved borrowers. This may require changes in the way that custodians undertake lending of safe custody securities and the revision of master securities lending agreements entered into by insurers.

For further information concerning any item in this publication please contact Jurgens Bezuidenhout on JB@JurgensB.co.za or telephone +27 82 922 3671 or Hilgard Bell on HilgardB@JBHB.co.za or telephone +27 83 608 2056