‘New era for financial sector regulation in SA’: Nene

Minister of Finance, Mr Nhlanhla Nene

The birth of the Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA) marks the beginning of a new era for financial sector regulation in South Africa. This is according to the Minister of Finance, Nhlanhla Nene who spoke at the launch of the FSCA held earlier today in Pretoria.”It is an era where things will be done differently, drawing from the lessons of the past and driving the best outcomes for our country and those who live in it,” the Minister said.

He added that the financial sector can better serve the needs of South Africans by making:

Financial products less complex, if not just plain simple;

Fee structures simple to understand so that customers can assess the real value and the total cost of the products and services they are buying;

Products and services appropriate to the needs of customers and therefore provide real benefits to customers; and

The financial sector safer for customers by weeding out the unscrupulous characters who siphon off the monies of customers and other beneficiaries.

“The Financial Sector Regulation Act therefore created the FSCA as a market conduct regulator, with a clear mandate to ensure that financial services firms treat their customers fairly,” Minister Nene stated. “The FSCA takes the baton from the Financial Services Board which had already started some of the projects that the FSCA will continue with.”

Also underway, the Minister explained, is the project of the regulatory framework for how financial products and services are distributed to consumers.

“The delivery of financial products and services has huge impact on the fair treatment of consumers. There is also the issue of unclaimed benefits, in particular ensuring that this issue is addressed in consistent and effective manner.”

He said that there has currently been greater focus on the retirement industry – however, unclaimed benefits have to be treated consistently across the entire financial services sector.

The FSCA will also regulate the conduct of retail banks and payment services.

“In this regard, National Treasury has commissioned a diagnostic study into the retail banking sector. The recommendations from this exercise will inform the development of a comprehensive strategy for regulating retail banks and addressing identified poor customer outcomes.”

Minister Nene said the FSCA also has a mandate to ensure the efficiency and integrity of financial markets.

“To better address financial market abuses, a comprehensive Financial Markets Review is already underway under the leadership of former Senior Deputy Governor of the South African Reserve Bank, James Cross.”

Another pillar of the FSCA mandate is consumer education to raise the levels of financial literacy.

“This will support the work of the National Consumer Financial Education Committee chaired by the National Treasury. One initiative in this regard is South Africa’s first MoneySmartWeek planned for October this year.”

While the FSCA will build on the momentum created by the FSB, Minister Nene said its operations will be a significant break from the past, with a more intensive and intrusive approach to regulation and supervision.

“This approach will lay the basis for transforming the financial sector to serve customers and South Africa better.

“Work is also underway to harmonize market conduct legislation. Once passed into law, the Conduct of Financial Institutions Bill will entrench principles of fair customer outcomes across the sector. It will also enable the FSCA to take a proactive, proportionate and risk-based approach to regulation.”

The Minister added that the FSCA will mark its six-month anniversary with the release of its regulatory strategy, setting out in detail its approach over the next three years.