In a presentation to the Standing Committee of Finance on Tuesday (5 February), Treasury warned that a number of recent banking failures – including the failures of African Bank and VBS Mutual Bank – showed that a banking licence should not be handed out lightly.
It also warned of previous issues with state-owned banks, highlighting that the South African Post Office used depositors’ funds to finance postal operational losses in the late 1990s.
“International experience and South Africa’s own experience suggests that state ownership of banks has (the) potential to undermine prompt corrective action by prudential regulators,” it said.
“Prudential regulators sometimes forebear (i.e. they do not apply full regulatory measures) when faced with failing state banks due to the reluctance to frustrate what could be viewed as government policy or programs.”
Treasury added that the traditional rationale for introducing a state bank
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