A Safer Financial Sector to Serve South Africa Better

Question 1

Government’s proposals in the document emphasise 3 principles

Answer 1

• Financial Stability
• Consumer Protection
• Financial Inclusion

Question 2

Main proposal of the document

Answer 2

To separate prudential and market conduct regulation.

Question 3

The document addresses 5 areas

Answer 3

• Stability
• Consumer Protection
• Access to financial services
• Coordination
• Comprehensiveness

Question 4

How does the document address:

stability

Answer 4

The Reserve Bank’s mandate for financial stability will be underpinned by a new Financial Stability Oversight Committee, co-chaired by the Reserve Bank Governor and the Minister of Finance.

Question 5

How does the document address:

consumer protection

Answer 5

Government will enhance consumer protection.

The structure of the Financial Services Board (FSB) will be broadened to include a banking services market conduct regulator.

Question 6

How does the document address:

Access to financial services

Answer 6

Financial access will be broadened.

The Financial Sector Charter will be reviewed and reforms undertaken to encourage “micro insurance”.

Question 7

How does the document address:

Coordination

Answer 7

Regulatory coordination will be enhanced, and regulators strengthened as required.

The Council of Financial Regulators will be formalised.

Question 8

How does the document address:

Comprehensiveness

Answer 8

All businesses in the financial sector should be licensed or registered.
Institutions providing similar services should be regulated by the same agency.

Question 9

4 Policy objectives of the document

Answer 9

1. Financial stability
2. Consumer protection and market conduct
3. Expanding access through financial inclusion
4. Combating financial crime

Question 10

3 Policy trade-offs and competing objectives

Answer 10

FINANCIAL STABILITY vs ACCESS TO CREDIT
(excessive lending creates stability risks)

CONSUMER PROTECTION vs FINANCIAL STABILITY
(high fees mean a stable sector, but might disadvantage consumers)

COMBATING FINANCIAL CRIME vs FINANCIAL ACCESS
(onerous requirements might impede access for the poor)

Question 11

Aims of regulating the financial sector include (5)

Answer 11

• Maintaining CONFIDENCE in the financial system and sustaining systemic STABILITY
• Ensuring providers of financial services are APPROPRIATELY LICENSED
• Promoting appropriate MARKET CONDUCT and prosecuting cases of market misconduct (i.e. protecting consumers)
• Maintaining the safety and SOUNDNESS of financial institutions
• ENFORCING applicable laws

Question 12

Desired outcomes of the Treating Customers Fairly (TCF) initiative

Answer 12

• Consumers should be confident that they are dealing with firms where the fair treatment of customers is central to corporate culture.
• Products and services marketed and sold in the retail market should be designed to meet the needs of identified consumers.
• Advice should be suitable and take account of the consumer’s circumstances.
• Consumers must be provided with clear information and kept informed before, during and after the point of sale.
• Consumers should be sold products that perform as firms have lead them to expect, within reasonable limitations.
• Consumers should not face unreasonable post-sale barriers imposed by firms to change products, switch provider, submit claims or complain.

Question 13

3 Problems identified in the short-term insurance industry

Answer 13

• high costs
• lack of appropriate disclosure
• conflicts of interest