22 February 2006
Dear Sir,
COMMENTS ON THE
MEMORANDUM ON THE OBJECTS OF THE BANKS AMENDMENT BILL AND THE BANKS AMENDMENT
BILL
In response to your request for comments on the Memorandum
on the Objects of the Banks Amendment Bill and the Banks Amendment uj Bill
attached please find the comment letter prepared by the South African Institute
of Chartered Accountants (SAICA).
We thank you for the opportunity to provide comments on this
document.
Please do not hesitate to contact us should you wish to
discuss any of our comments.
Yours sincerely
Thingle Pather
Project Director Auditing
cc: Tom
Winterboer (Chairman of the SAICA Banking Project Group)
The following serves as a summary of our observation
regarding the amendments to the Banks Act which we have highlighted for your
attention:
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2 second last paragraph states:
Other amendments that have been necessitated by changing supervisory
policy
It was questioned whether or not the
matter of on- or off-site supervision by the regulator would be dealt with
under the regulations, since this would play an important role for the auditor.
It was noted that the on-site supervision model was favoured since the
regulator was ultimately responsible for bank supervision and that Basel II
required the regulator to perform on-site supervision.
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7, section 5.3 the relationship between the host and home regulator has
not been clearly defined.
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7, section 5.1 it was noted that in order to facilitate the sharing of
information relating to securities and insurance supervisors, the
regulator would need to enter into a memorandum of understanding with the
Financial Services Board.
These comments relate to the wording contained in the
Memorandum on the Object of the Banks Amendment Bill, 2006 and the Banks
Amendment Bill, 2006. For ease of reference we have used the exact page
numbering and section numbering as used in these documents. Where possible we
have included suggested wording.
Memorandum on the
Objects of the Banks Amendment Bill, 2006
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4, section 1.3 the definition of deposit
needs to made clearer in order to include reference to
(Amman please complete)
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4, section 1.4 the definition of division
needs to be made clearer in order to include reference to
(Amman please complete)
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4, section 1.9.5 Pieter to provide comments.
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10, section 10.3 it was noted that the memorandum of understanding made
it clearer to understand the levels and authority of circulars, guidance
notes and directives compared to the amendments to the Act. Therefore the
amendments would need to be clarified. Concern was expressed regarding the
use of the word circulars since this would be associated with the previous
Banks Act circulars. It was also noted that since the two tiers of
documents namely, circulars and directives would be mandatory that there
should be adequate levels of authority built into the approval process
before these documents are released. Lastly it was suggested that where
any of the three tiers of documents related to auditors, that wording
should be built in to ensure that this was done in consultation with the
auditing profession through SAICA.
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10, section 11.1 it was noted that whilst the flow of information was
necessary, more guidance was needed relating to what type of information
was included.
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13, section 15.3 it was noted that off-balance sheet exposure should
also be included.
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16, section 21.3 it was noted that average balances were favoured rather
than month-end balances which could be easily manipulated. If the current
wording was retained then consideration should be given to requiring a
comparison between month-end balances and average balances.
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17, section 23.1 the definition of a person
needs to be made clearer in order
to include reference to
(Amman please complete)
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20, section 27.4 the inclusion of the wording similar characteristics was seen as problematic and it was suggested
that the registrar provide guidance relating to new instruments.
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20, section 28.2 it was suggested that consideration be given to the
establishment of a dual system with the Financial Services Board relating
to the Financial Advisory and Intermediary Services legislation.
Banks Amendment Bill,
2006
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5, section 1(i) it was noted that the or at the beginning of the underlined section should be an and
instead.
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6, section 1(j)(c) Pieter to provide wording.
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7, section 4(b) a related entity
should be defined since it could be interpreted as being very wide.
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8, section 6(e) it was questioned whether this provision included access
to working papers, and if so, this could be in conflict with the auditing
firms internal policies. The reason for the access was also questioned
since the evaluation of the quality of the audit was the responsibility of
the Public Accountants and Auditors Board.
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8, section 9 it was noted that the word may should be amended to must in order to ensure
transparency.
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10, section 7(1) (a)(i) to (iii) it was noted
that reference was made to material impact and that since this was
different from audit materiality that it should be defined.
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24, section 14(1) it was noted that whilst consideration had been given
to non-executive directors there was no reference to independent
non-executive directors.
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27, section 2(j) it was noted that the reference to material risks needed
to be defined in order to provide clarity as to what would be included.
- Page
27, section 2(m) it was noted that this requirement was in conflict with
the mandate of the Audit Committee.
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43, section 27 it was noted that verification involving an auditor
should be agreed on through consultation with the auditing profession
through SAICA.
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