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IOL News
19-05-2025
- Business
- IOL News
FSCA moves forward with COFI Bill as concerns mount over bank account terminations
According to the current regulatory frameworks, banks are obliged to notify customers and provide them with the opportunity to make representations before terminating their accounts. Image: Independent Media / Ron AI The Financial Sector Conduct Authority (FSCA) has confirmed that it is moving forward with the Conduct of Financial Institutions (COFI) Bill, which aims to provide a fair process for bank account closures. Following a series of delays that initially pushed the tabling of the Bill in Parliament to January, the FSCA announced on Monday that it is now set to submit the Bill to Cabinet for approval soon. In response to a list of questions from Business Report, the FSCA said the Bill adopts a principle-based approach, in other words, it contains high-level principles that financial institutions must adhere to, to ensure the desired outcomes in the financial sector. 'However, it reinforces and extends the principles of fairness for termination of financial products and services already contained in the Conduct Standard for Banks (2020). The Conduct Standard deals explicitly with bank account terminations, i.e. financial customers must have access to a fair process when products and services are terminated (this includes account closures),' said the FSCA. 'It falls short of explicitly prescribing a fair hearing, for various reasons, including that this would not be appropriate where there is suspicion of money laundering, terror financing and other criminal activity, and may actually conflict with other legislation that requires no notice.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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In South Africa, the Supreme Court of Appeal in Bredenkamp v Standard Bank set the standard for the unilateral termination of the bank-customer relationship on the grounds of reputational risks. John Bredenkamp was a Zimbabwean-based business tycoon suspected of being involved in illicit business activities including tobacco trading, arms trafficking, oil distribution, and diamond extraction. The judgement sets out several principles South African banks have relied on when terminating relationships with their customers. According to the FSCA, the relevant provisions dealing with bank account closures in the Bill are contained in the Conduct Standard for Banks, published under the Financial Sector Regulation Act, 2017. The Conduct provides that banks must conduct their business in a manner that prioritises the fair treatment of their customers; adopt and implement processes and procedures relating to the withdrawal or termination of a financial product or financial service, including closure of a bank account. It also makes provision for reasonable notice of the intention to withdraw or terminate a financial product or financial service, including closure of a bank account by providing reasons for the proposed withdrawal, termination or closure, unless certain circumstances prevail. 'The Conduct Standard furthermore provides that contractual agreements with financial customers must make provisions for circumstances in which the contractual agreement may be terminated or withdrawn by the bank,' said the FSCA. 'This implies that the closure, termination or withdrawal of a financial product must be done as part of an agreed process enforcing contractual obligations and remediating breaches. The circumstances in which terminations may occur must be disclosed to the customer in the contract. 'Both the existing Conduct Standard and the proposed COFI Bill require a fair process for account closures. What constitutes 'fair' and whether this includes the right to be heard will depend on various circumstances that may not be best resolved through further regulatory amendments. 'Instead the FSCA is engaging with the sector to determine a more appropriate way of ensuring consistent understanding and application of 'fairness' based on various scenarios. This will be based on a review conducted by the FSCA of the sector's practices in this regard.' In 2022, lawmakers have hauled the FSCA over the coals about the lax manner in which they were treating the unilateral and arbitrary closure of bank accounts. In his final State Capture report, Chief Justice Raymond Zondo recommended that relevant existing legislation governing banks be amended to introduce a requirement of fairness or, if warranted, a new piece of legislation to be enacted to compel the banks to afford the client a proper opportunity to be heard before their accounts were closed. Visit:
The Citizen
12-05-2025
- Business
- The Citizen
FSCA to investigate due to banks charging different amounts for the same product
The minister of finance answered some written questions in parliament about bank charges and nationalising the Reserve Bank. The Financial Sector Conduct Authority (FSCA) is investigating bank charges after observing several variations in the pricing approaches and structures between different banks. There is also concern about disclosure and how consumers understand these fees, says Finance Minister Enoch Godongwana. Godongwana, minister of finance, says in a written answer to Omphile Maotwe, an EFF MP, that In some cases there are significant disparities in fees between banks for the same or relatively similar products or services. Maotwe asked Godongwana, in a parliamentary question, if National Treasury is investigating exorbitant bank charges. Godongwana says the FSCA is responsible for overseeing the market conduct of banks, including whether the fees and charges banks impose are fair and transparent. ALSO READ: This is how to beat bank fees FSCA spotted several variations in bank charges at banks 'Through its ongoing supervisory activity, the FSCA observed several variations in the pricing approaches and structures of banks. Concerns were also identified about some of the banks' lack of adequate disclosure and customers' poor understanding of these fees. 'Therefore, the FSCA recently initiated a dedicated project to undertake a deeper assessment of transactional fee practices across registered banks in South Africa to determine whether further regulatory or policy interventions are needed.' Maotwe also wanted to know if Godongwana found that he and the governor of the South African Reserve Bank (Sarb) have the same policy approach on the role that the Sarb should play in terms of the transformation of the financial sector. Godongwana says in his answers that FSCA published the Conduct Standard for Banks 3 of 2020 which became effective in July 2021 as the responsible authority for supervising the market conduct of banks. The Conduct Standard was issued in terms of section 106 of the Financial Sector Regulation Act. ALSO READ: FSCA finds banks do not handle consumer complaints properly Conduct Standard for Banks requires transparency for bank charges 'The Conduct Standard introduced requirements for banks to conduct business in a manner that prioritises the fair treatment of financial customers. Section 5(1)(d) of the Conduct Standard stipulates that a bank that provides financial products or financial services must ensure that the terms, conditions and requirements in a contract between the bank and its retail financial customer, relating to a financial product or financial service, including fees and charges, are not unfair. 'Section 5(2) further stipulates that a term, condition or a requirement in a contract is unfair if it would result in an unfair outcome (financial or otherwise) to a financial customer if it was applied or relied on.' Godongwana says while the Conduct Standard does not prescribe or stipulate what would constitute an unfair or 'exorbitant' fee or charge, banks must be able to demonstrate that the basis for their fees and charges are reasonable and that these fees and charges do not result in unfair outcomes for financial customers. The FSCA will conduct the assessment of bank charges on this basis. ALSO READ: EFF-initiated Private Members Bill a set-up for ANC, says expert No plans to nationalise the Reserve Bank In another answer, to Nontando Nolutshungu, an EFF MP, Godongwana says government does not have any plans to nationalise the Sarb. 'While 100% ownership of the Sarb by the state would be in line with most countries and jurisdictions across the world, the benefit that would be derived from nationalising the Sarb must be balanced against the likely large fiscal cost that would accompany it. 'The costs would include compensation in terms of section 25 of the Constitution as well as existing bilateral investment treaties. However, the benefits of 100% ownership of the Sarb are minimal, as private shareholders are currently restricted to playing a governance role only and play no role in determining monetary, prudential, regulatory or any other policy, as policy issues are the sole responsibility of the governor and deputy governors of the Sarb who are appointed by the president.' Godongwana says it is more fundamental for the country that the Sarb ensures that it is allowed to independently pursue its constitutionally enshrined mandate of protecting the value of the currency in the interest of balanced and sustainable economic growth in the Republic and its additional objective of protecting and maintaining financial stability as envisaged in the Financial Sector Regulation Act.
