Financial Sector Regulation Bill [B 34-2015]: deliberations on clauses 7 to 44

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Finance Standing Committee

24 August 2016
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

The Committee met with National Treasury, the South African Reserve Bank and FSB to discuss the new working draft of the Financial Sector Regulation Bill. The Committee worked through clauses 7 to 44 of the July working draft of the Bill examining and approving the amendments that had been made since the public hearings. The Committee approved most clauses but flagged some for amendments.

The clauses that were heavily discussed were: Clause 7 Object of Act, Clause 11 Reserve Bank responsibility for financial stability, Clause 13 Financial stability review; Clause 29 Designation of systemically important financial institutions and Clause 30 Prudential standards and regulator’s directives in respect of SIFIs.

 

Meeting report

Clause 4 Financial stability
The Chairperson noted that there is no universal definition of financial stability. Internationally, there is not complete clarity on it and noted that the United Kingdom, during their study tour there, raised this.

A question was raised whether the definition should be wider than financial institutions.

Ms Katherine Gibson, Treasury Chief Director: Financial Sector Conduct, National Treasury, said what is being captured here is a narrow definition of financial stability, looking at financial institutions rather than the economy at large.

The Chairperson agreed that the focus of the Bill is on the industry.

Clause 5 Responsible authorities
There was no discussion.

Clause 6 Financial institutions that are juristic persons
There was no discussion.

Financial Sector Regulation Bill: clause by clause deliberations on amendments
Clause 7 Object of Act

He noted the Absa comment about making the financial sector more representative of the people of South Africa. What is the problem of putting this proposal in? The Chairperson said the financial sector is very powerful. The financial sector is extremely racialised and it is 22 years later. The Committee recognises the complexities of this and it is not naive. There has to be concern about 98% of the industry is controlled by four banks. So what is the problem of putting this in?

Ms Katherine Gibson, Treasury Chief Director: Financial Sector Conduct, National Treasury, said the question is whether by inserting it here in the legislation, are we duplicating what is in the Financial Sector Charter.

Mr Ismail Momoniat, Deputy Director General: Financial Sector and Tax Policy, National Treasury, pointed out that they are busy with the final draft of the latest version of the Financial Sector Charter.

The Chairperson said this is a policy of the majority party. He did not think that Treasury should be oblivious to this and there is a perception that Treasury is reluctant to transform the financial sector. The Bill must have some reference to transformation and deal with transformation adequately. So what is the problem? This is the policy of the majority party that and there should be some text in the Bill about transformation.

The Chairperson said there must be some measure about transformation – it is almost non-negotiable; it is just the text that needs to be tweaked.

Mr B Topham (DA) said that one can put it in as an object but what does the Bill do towards achieving this? This is a very practical Bill.

The Chairperson said the Bill is not finalised. We may be required to insert further clauses down the road to provide for this, without drifting the Bill from its terrain. He agreed the question was relevant.

Mr Momoniat said there is no problem of including this but does this Bill have the tools to take this further. It is not the object of this Bill but of other Acts and the Financial Sector Charter.

The Chairperson asked if there are any objections or any amendments that members want to make to the clause.

Mr D Maynier (DA) asked what the word ‘’balanced’’ means in the context used in “balanced and sustainable economic growth” in relation to financial stability. Treasury should know what it means and why it is used.

Mr Momoniat replied that the word ‘’balanced’’ comes from Constitution and that Treasury was extending it to the Bill.

The Chairperson said that he agreed with this. The word ‘’balanced’’ in the context used, has been used in the Constitution and the World Bank and IMF has been using it for years, thus it is appropriate to use in the Bill. The objectives of clause 7 should be within the constitutional mandate. He asked how Treasury aims to do this.

The Chairperson asked that the team look into how we can put transformation into the Objects and he made several suggestions along the line “that the objects of the Bill set out above are consistent with the transformation of the sector”. So it is not a direct object.

Mr Jenkins agreed saying that having this in will guide the various administrators that have to make rules.

Mr Momoniat replied that the team would look into it.

The Chairperson noted that the objects are the themes that Members should keep in mind that should go into the law or if not, into the Committee Report. These thematic considerations should be kept in mind as the Committee goes through the Act, such as financial inclusion, the protection of financial customers including financial literacy. And these themes will be used as a tool for monitoring implementation of this Act.

The clause is flagged awaiting the requested drafting changes.

Clause 8 Administration of Act
There was no discussion.

Part 3 Application of other legislation
Clause 9 Inconsistencies between Act and other financial sector laws
Stakeholders had drawn attention to the Act superseding other acts.

The Chairperson noted that Treasury often acts like Big Brother. He commended the improvement in the drafting of this clause.

Clause 9(1) and (2) were accepted.

Clause 10 Application of other legislation
The Chairperson asked why both the Prudential Authority and the Prudential Committee are mentioned in 10(1)(b) separately and not treated as one entity.

It was explained that the one was its governing body.

The Financial Services Board (FSB) added that they crafted the wording in line with the Consumer Protection Act.

On Clause 10, Ms T Tobias (ANC) asked the extent to which other government entities, such as the Department of Trade and Industry, were consulted on the clause dealing with the Competition Act. She pointed out that the Minister can override the Competition Act in 10(2).

Mr Momoniat replied that they are in constant consultation with the other entities. We want the financial sector to have much higher standards. The issue with the Competition Act is only to do with the definition of merger.

Ms Jeannine Bednar-Giyose added that there is a similar provision in the FSB Amendment Act.

Ms Tobias said that her question is not answered adequately. Was there any input? Was there any reservation from DTI?

The Chairperson remarked that that is how law is at the moment and there has been constant communication and consultation with other entities and it has been taken to Cabinet.

The Committee accepted Clause 10.

Mr S Buthelezi (ANC) asked what company law says of ‘merger’ outlined in clause 10.

Ms Gibson replied that the reference is made to the Competition Act as we need to apply the definition of ‘merger’ as used in the in the Competition Act to ensure consistency and that is the reason for the cross-referencing.

She assured the Committee that the DTI, the Competition Commission and the National Consumer Commission were consulted.

Chapter 2 Financial Stability

Part 1 Powers and functions of Reserve Bank
Clause 11 Responsibility for financial stability

Mr B Topham (DA) asked about the Reserve Bank’s responsibility around a hyperinflationary environment and monetary policy.

Ms Tobias replied that this is a policy matter. This is not necessary for discussion on this clause. The Committee could spend all day debating what financial stability is.

The Chairperson said both had a point but this had been discussed in a previous Committee Report which the DA had accepted. He mentioned that he had been approached by a journalist the previous day who asked if he wanted to comment on the DA alleging that this Bill is being fast-tracked. He said he just laughed at this nonsense.

Mr Momoniat said the Bill is keeping a narrow definition of ‘financial stability’ which is the failure of a financial institutions to deliver on their promise and linked to that we look at concepts such as SIFIs. In the old days this was restricted to banks. If one fails, it has huge implications. We are not looking at inflation here; that is dealt with in the Constitution and the SARB Act. What we are adding is the mandate of financial stability. In 2009 or 2010, it was a delegated function of the Minister but now it is SARB’s responsibility as in clause 4.

Mr Topham said should not financial stability include the economic issues such as inflation.

The Chairperson said there is no agreement on what financial stability means. We can come back to this when Mr Havemann is here.

Ms Tobias said SARB’s mandate is in the Constitution. The DA’s take on SARB is that its role is to manage inflation. It is a contested terrain. Until financial stability is posed differently than it is at this juncture, we can debate that at another time. In this context, we are talking about the stability of banks and it does not single out hyperinflation as an issue for contestation. The DA is trying to bring it into the Bill through a back window. They have an issue with how we handle inflation. If we want to discuss financial stability, we can put aside this Bill and talk about the ANC context of what is financial stability and why it is stated as such in this Bill.  

The Chairperson said Mr Topham was within his rights to raise the question.

Mr Momoniat said SARB is governed by section 224 of the Constitution. Any other functions assigned to it must be by way of enactment. It was not a major concept Most central banks only took on financial stability after the 2008 crisis. Look at the UK because you visited there. The UK has a monetary policy committee which focuses on inflation and interest rates but it also has a financial policy committee that looks at stability.

Mr Kamlana stated that SARB’s take on financial stability is that it is represented by three pre-conditions: The efficient and effective smooth operations of the intermediaries, markets and market infrastructure, as found in 11(4)(1)(a); Resilience of the financial system to both financial and economic shocks as found in 11(4)(1)(b); and there must be public confidence in the intermediaries and the entire financial system to perform the functions. SARB is satisfied that the Bill covers these three pre-conditions, and the resilience must be able to absorb both financial and economic shocks.

Ms Tobias said the DA has always questioned the mandate of SARB and they have not explained the need to change the independence of SARB to use its discretion to determine what is relevant both in the economy and the financial sector. Do not allow people to smuggle in this debate. One cannot throw concepts about and not use convincing arguments.

The Chairperson suggested that Ms Tobias and Mr Topham should go off and have a debate about the matter.

Clause 12 Monitoring of risks by Reserve Bank
There was no discussion.

Clause 13 Financial stability review
Mr Lees (DA) noted that SARB must "at least once every six months" generate a financial stability review. He suggested putting wording in to tighten this up to ensure one gets regular and evenly spaced reports.

Ms Gibson said Treasury once a year unless there are systemic event, otherwise it tends towards repetition.

Mr Kamlana said that the reports are published bi-annually in March and September. One cannot have it in a shorter time as one needed to establish a trend and this time period gives sufficient flexibility and is practical.

Mr Lees noted that Mr Kamlana is saying the review is done for particular months of the year which happen to be six months apart. The text does not say that. He would prefer not to leave it as loose as it is now which means it could be published at variable times. It should be more specific.

Ms Tobias suggested using "biannually”.

It was noted that there are two stability reports a year unless there is a need for a special additional report due to a specific event. That is the intention and one needs to find wording to capture that.

Mr Momoniat cautioned against being too specific or too prescriptive on the central bank.

Mr Maynier said that if there is a financial stability event, there should not be discretion, but one should legislate that there should be a report.

Mr Momoniat again cautioned that when a bank is failing, that is not the time to say the bank is failing. That is why we regulate; you still want to salvage that bank. You do not want regulators reporting “Fire”. Markets can be very turbulent. It would not do to insert a clause insisting that SARB report at such a time. SARB is always under pressure to ensure the markets are safe. He appealed that they do not to go down the route of putting in more detail. One can put in wording saying at least two times a year but no further than that. It is fine to report on it post facto.

Mr Kamlana pointed out that one must read clauses 13 and 14 together. Clause 13 is for peaceful times where it states at least every six months, if something important pops up - not a systemic event – it can publish a special report. Clause 14 deals with SARB not having discretion, it must issue a determination about a systemic event.

Mr Lees was then satisfied with “at least every six months” as that meant it could not stretch to 12 months.

Ms Gibson explained 13(4)(b) said that timing is important and publishing sensitive information could cause a run on the bank to ensure it does not bring on an event.

Mr Kamlana said if you publish, you exacerbate the risk – it is the timing.

The Chairperson says he agrees and understands but someone might say - in terms of independence and transparency - you have info that may contribute to a systemic event, the systemic event happens in any event, but you kept it to yourself, but you could have warned us?

Ms Tobias questioned how one measures materiality in this context. She does not have a problem with withholding information because it can be challenged if it is not defined what is seen to be material. She accepts the timing but then one should include the timing concerns in 13(3).

Mr Buthelezi asked about the moral application - does it not sterilise everything what we are trying to do.

Mr Lees said in a sense what this is doing is not only removing the review from the public but also the Minister – that may or may not be right.

Given the concern about timing, Mr Maynier suggested that it is not reported but when the risk subsides, it must be reported.

The Chairperson agreed this was an option.

Ms Tobias cannot legislate for assumptions; one cannot cast aspersions on the calibre of individuals in charge of this. Clause 14 makes it very clear that the Governor will inform the Minister.

Mr Topham said no one wants a whitewash report. He suggested no report should be published so the Minister does not get a report that has been cleaned up.

The Chairperson said two subjects are being raised here: pre-empting the right of the public to information; and informing the Minister.

Ms Tobias let us not be assumptive of SARB’s intention and objects. The mandate of SARB is very clear.

Mr Momoniat said in spirit there is a lot of agreement. Currently the law does not require SARB to do this, but they started doing this anyway. The Constitution requires coordination between the Minister and the Governor. If there is a systemic event, they will have to resort to the fiscus at some point so the Minister would have been informed anyway. You cannot legislate for all these possibilities. He agreed with Mr Maynier's suggestion. Treasury can put in provisions along these lines.

Mr Maynier said 13(4)(b)  does not state what method to publish the report. Currently he thinks it is placed on the SARB website. It should stipulate that it publish within a reasonable period after produced and for the report to be tabled in Parliament.

Ms Tobias said this could be done via regulations, but not in the law, that the report be tabled in Parliament.

The Chairperson asked everyone in the Committee and they agreed along with him that both Mr Maynier’s suggestions be accepted.

Part 2 Managing systemic events and risks in relation to systemic events

Clause 14 Determination of systemic events
Mr Lees "may determine in writing" in 14(1).

Ms Gibson explained that extraordinary powers are being given to the Governor so it is necessary that it is recorded and justified.

Mr Lees asked "in writing" to whom?

Mr Momoniat agreed that to whom needed to be captured in the next draft.

The Committee accepted the clause.

Clause 15 Functions of Reserve Bank in relation to systemic events
The Committee accepted the clause.

Clause 16 Information to Minister
The Committee accepted the clause.

Clause 17 Responsibilities of financial sector regulators
Ms Gibson said 17(a) was a minor correction.

The Chairperson was pleased with the clean-up.

The Committee accepted the clause.

Clause 18 Directives to financial sector regulators
The Committee accepted the clause.

Clause 19 Exercise of powers by other organs of state
Ms Gibson said the change to 19(3) was a cleaning up and not a material change to the clause. It removed the repetition.
 
The clause was accepted.

Part 3 Financial Stability Oversight Committee
Clause 20 Establishment of Financial Stability Oversight Committee
Ms Gibson said this was a general comment about a number of committees [linked to 45)(2) and (3)] where the commentators saw it as appropriate that they participate in these committees. Treasury’s view was this was a misunderstanding of what the committees are and their functions – as they are comprised of the regulator not the regulator entities, so the comment was not accepted.
 
Clause 20 was accepted.

Clause 21 Functions of Financial Stability Oversight Committee
The clause was accepted.

Clause 22 Membership
The Chairperson asked what sort of category of person is envisaged in 21(1)(h).

Ms Gibson said this wording gives flexibility. It might not necessarily be a regulator but if you wanted someone, such as STRATE mentioned in an earlier comment, to attend who runs a market infrastructure that is linked to the particular stability issue.

Mr Momoniat said some central banks get an ex central banker or a current central banker from another country to serve on the committee.

Ms Gibson said it could be from another regulator, a government department, or as Mr Momoniat mentioned

Mr Buthelezi said that there should perhaps be a limit on the numbers who serve in the committee from 21(1)(h) as you would not want them to exceed the number of designated members.

Ms Gibson said they debated it at length and this wording gives the flexibility needed.

The Committee amended it to state it cannot exceed the designated members.

The clause was accepted with this change.

Clause 23 Administrative support by Reserve Bank
The clause was accepted.

Clause 24 Meetings and procedure
Mr Lees raised again his point about “at least twice a year” meeting should be held – they could meet in two consecutive months and then not meet again for the rest of the year. What is the intention?

Treasury agreed to change the text to “at least once every six months”.

Part 4 Financial Sector Contingency Forum
Clause 25 Financial Sector Contingency Forum
Ms Gibson said JSE had a comment to Treasury about the role of market infrastructure, of which the JSE is one, not being represented here. Treasury’s view was that these are the anchor members that are mentioned here.

Ms Jeannine Bednar-Giyose, Director: Financial Regulation and Legislation: National Treasury, referred to 25(3)(b) which provided flexibility to include any relevant body or person.

Mr Lees raised again his point about “at least twice a year” that a meeting should be held.

This was accepted.

Part 5 Roles of financial sector regulators and other organs of state in maintaining financial stability
Clause 26 Co-operation among Reserve Bank and financial sector regulators irt financial stability
The clause was accepted.

Clause 27 Memoranda of understanding relating to financial stability
Mr Maynier requested clarity on the effect of clause 27(4) as raised by a stakeholder:
“(4) The validity of any action taken by a financial sector regulator in terms of a financial sector law, the National Credit Act or the Financial Intelligence Centre Act is not affected by a failure to comply with this section or a memorandum of understanding contemplated in this section.”

Ms Gibson clarified that there are other measures in place to better hold the regulators to account over their MOUs in the exercise of their regular duties. One does not want a procedural contravention of an MOU to become a tripping hurdle and used to invalidate the decision of the regulator.

Clause 28 Roles of other organs of state in relation to financial stability
The clause was accepted.

Clause 29 Designation of systemically important financial institutions
Ms Gibson explained that the changes to 29(2) were to provide greater articulation and description.

She said that the wording in 29(3) was changed as the drafting was crafted strangely before.

The Chairperson clarified that the interpretation of "or" in legislation means "and/or”, which Mr Jenkins confirmed.

Mr Maynier raised a concern about the use of “any” in “any institution” in 29(4). The DA believed it was too broad and should insert “provided such is reasonably related to the systemic event”. There had to be a reasonable link between a systemic event and the institution that is being designated as a SIFI. There could be a situation where the SARB Governor could perhaps have another agenda against an institution and then designate it as a systemically important financial institutions (SIFI), thus restricting it and putting conditions on it.

The Chairperson noted that this was a crisis situation and you cannot go through the whole process. He pointed to the provision that the institution may make submissions and the SARB Governor must consider these in 29(4)(b). He understood the concern but he did not agree it was appropriate in this situation.

Mr Momoniat noted that this is a key designation.

Mr Kamlana said his understanding is that there is a clear test in (a) and (b) with clear conditions: a systemic event has occurred or is imminent. There was a proviso – it had to be related to a systemic event.

Mr Maynier said he would like to frame the question differently: what elements are you trying to circumvent in 29(4)(a) which states “without complying, or complying fully, with subsection 29(2) or (3)”.

Ms Gibson replied that the three elements of the test comprise of: talking to the institution involved, taking it to the FSOC, then considering those items listed there. Our intention is by the way it is framed, it does take into account those elements but there is just a timing factor. There is the matter of the FSOC but the FSOC will be so integral to the systemic event anyway.

Ms Tobias said Clause 29(4)(a), (b), (c) gives you confidence that it provides clear protection from a Governor's whim. The DA cannot cite a concrete example of where a Governor has ever acted like this. A person who is appointed as Governor is a person of integrity. She said that being the Governor of the South African Reserve Bank is not like running a tuck shop. She noted that the Governor “must” consider the submission. You could add (d), in the event the Governor has fail to consider the submission, the SIFI will have an opportunity to take the matter further.

The Chairperson said but it can do that anyway, it can approach the court.

The Chairperson said he had considered the powers given to the Governor here but he felt it was acceptable. There is no case.

The majority of the Committee agreed to leave it as is.

The Committee agreed with Mr Jenkins that the scrapping of the phrase “subject to due process” in clause 29(6) in the July working draft of the Bill was correct as it was superfluous.

Clause 30 Prudential standards and regulator’s directives in respect of SIFIs
Ms Gibson said the change from ‘directives’ to ‘regulator’s directives’ was merely to add detail.

The Chairperson noted that ASISA had a comment about SARB having full powers to set requirements on these aspects in using the prudential standards.

Ms Gibson replied that ASISA said there are not enough checks and balances but Treasury disagreed. The proposal from industry was not supported. The Prudential Authority can impose directives on the regulator entities.

The Chairperson asked if the regulator will have a say in the shaping of these directives.

Ms Gibson replied that they will have a say through consultation with the authority but ultimately the authority prevails over the regulator - so SARB prevails - but it still has to go through the consultation process. Different countries have different processes for their deliberations. Some jurisdictions have concurrence like in Australia and in the UK you have a hierarchy. They are trying to achieve a hybrid but the problem with concurrence is that you are taking away jurisdictional power from SARB.

The Chairperson agreed with approach. He said in South Africa one currently has a minister taking the ICASA regulator to court.

Mr Momoniat pointed out that SARB will prevail. Regulators do not like to be told. They do not understand systemic events. One does want with systemic events, if things get that serious, that SARB does prevail. What will happen if there is a dispute?

Mr Lees clarified that SARB is directing the Prudential Authority, which is part of SARB, so we are not talking about SARB and a regulator here.

Ms Gibson agreed.

The Chair asked for clarity on "leverage ratio".

Treasury replied that it is the extent of debt in an institution.

Mr Buthelezi (ANC) asked if ‘’leverage’’ really means debt. He asked for the difference between leverage as used in this context and debt. The Bill needs to use simple language so that it is not complex to understand.

National Treasury replied it is a standard term so it is not unduly complex. They did not want to define "leverage ratio" as it might limit this standard term. If one is gearing up, raising debt, the way to measure how much is the debt complement is the "leverage ratio". The instrument is the data contained in the returns of an institution. For a SIFI, one can change the frequency of submission of such returns with the data in it.

The Committee accepted this and the clause.

Clause 31 Winding up and similar steps in respect of systemically important financial institutions
Ms Gibson reminded Members what the industry submissions such as ASISA and JSE had said on this clause: that it was taking away existing legal rights. She said Treasury disagrees that it is taking away existing rights but is providing for greater articulation how winding up and similar steps would actually happen.

The Chairperson asked Mr Jenkins, Parliamentary Senior Legal Adviser, for advice on the matter.

Mr Jenkins replied that he needs time before he can answer the question adequately in a way that addresses all the multiple complexities. It is not normal circumstances.

The Chairperson said that they will flag the clause pending Mr Jenkins’ answer.

Ms Gibson explained the wording change from ‘approval’ to ‘concurrence’ was to ensure it was consistent with the language of the rest of the Bill.

Chapter 3 Prudential Authority

Clause 32 Establishment
In 32(3), the DA asked why the Prudential Authority is not a public entity in terms of the Public Finance Management Act (PFMA).

The explanation was that SARB, of which the Prudential Authority is a subsidiary, is not covered under the PFMA.

Clause 33 Objective
There was no discussion.

Clause 34 Functions
Mr Buthelezi asked about the interest in clause 34(c) in medical schemes.

Ms Gibson replied that the stability, prudential and conduct risks we talk about throughout the bill is as applicable to the medical schemes environment as it is to the financial sector. The Council for Medical Schemes as the regulator, is the relevant agency to have regulation coordination. You want advisors giving advice on medical schemes policies, to fall under a similar environment as other advisors.

Mr Buthelezi asked if there is another applicable institution that medical schemes could fall under.

Ms Gibson replied that we have covered the regulators in the form of the Council for Medical Schemes, Financial Stability Oversight Committee, the Financial Sector Conduct Authority, the Credit Regulator, and the FIC.

The Committee accepted this.

Mr Buthelezi asked why the term “without fear, favour or prejudice” is used in 34(5) rather than simply saying it must be independent.

The Chairperson explained that we cover independence in legislation with the term “without fear, favour or prejudice”. It is derivative of the Constitution. He agreed that Mr Buthelezi was right to ask the question and that the Committee battled with the drafters for many years but it has come to accept that there are certain norms in drafting legislation, especially in terms of conveying the spirit of the Constitution.

Clause 35 Overall governance objective
Mr Maynier asked when there is a systemic event, which institution has the powers to investigate the role of the SARB in dealing with the systemic event.

Mr Momoniat said when we have a major crisis you do want to have a process to assess if the regulators did their role. It was felt that this should remain in the political domain. It helps to have a commission such as with the Saambou event. We do think that this needs to be looked at. There are weaknesses in the current system. There are some structural flaws including multiple regulators down the line when there is a failure it is a failure of the regulators, Treasury want to know that the regulators are doing their job, otherwise it would mean a call on fiscus. Treasury felt that it does not need to be legislated, as normally it is done in the form of an enquiry.

Dr M Khosa (ANC) agreed that the question arises who judges the judges, when SARB has overstepped its mandate. However, there is consultation with the minister and cabinet and they can report to Parliament. She felt this was covered in that manner.

National Treasury noted that SARB is established in terms of the Constitution.

The Chairperson asked why is it that when National Treasury hires someone, the Committee in Parliament does not get notified however when someone is fired, the Committee is alerted.

Ms Gibson replied that this is done to ensure that there is no victimisation in the firing process.

Clause 36 Appointment of Chief Executive Officer
Mr Buthelezi asked a question of clarity about the two Deputy Governors, one as the CEO for the Prudential Authority and the other with expertise in the financial sector.

Clause 37 Role of Chief Executive Officer
There was no discussion.

Clause 38 Term of office of Chief Executive Officer
There was no discussion.

Clause 39 Removal of Chief Executive Officer
Mr Buthelezi 39(4) asked about the Governor and Deputy Governor having labour rights according to the Labour Relations Act.

Mr Momoniat said they are appointed by the President but they do have labour rights.

Ms Gibson said it is for transparency to make sure the person is not victimised, so it is “subject to an inquiry”.

In reply to the Chairperson, Mr Jenkins said if the report is tabled in Parliament, Parliament can express itself but it cannot review the decision.

Clause 40 Acting Chief Executive Officer
There was no discussion.

Clause 41 Establishment of Prudential Committee
There was no discussion.

Clause 42 Role of Prudential Committee
Ms Gibson said that the Johannesburg Stock Exchange had submitted an additional new comment. JSE question the difference of treatment in who issues the licence in the Financial Conduct Authority and the Prudential Authority.

Ms Gibson explained this difference is deliberate because of the different structure of the two. The Prudential Authority CEO is in an executive role versus the role of the Prudential Committee which is non-executive. In the Prudential Authority, the CEO can delegate the functions down. The Financial Conduct Authority has a Committee which has an executive role, where this is not permitted. It is due to the different structure. The misalignment is due to the Prudential Committee being non-executive and the other institution has an executive committee.

The Committee accepted this.

Clause 43 Meetings of Prudential Committee
The Committee accepted the minor changes made to this clause.

Clause 44 Decisions of Prudential Committee
The clause was accepted.

The meeting was adjourned.

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