Extra holidays ‘upset financial markets’

PUBLIC holidays announced at short notice pose “a huge risk to the smooth functioning of domestic financial markets”, according the Reserve Bank.

“Short notice” is defined as “within five working days”.

To minimise the potential damage, the bank has held a series of meetings with key players in financial markets to formulate a financial industry agreement.

Hlengani Mathebula, the head of group strategy and communications at the Reserve Bank, said: “The project was meant to standardise a framework to address challenges that arise when public holidays are declared at short notice, as well as to avoid any potential confusion with respect to interest calculations and other operational arrangements.”

Under the Public Holidays Act, South Africa has 12 public holidays a year. However, on occasion, additional holidays are declared.

Last year President Jacob Zuma declared May 18, the day of the local government elections, a public holiday. And he granted an extra holiday in December to ensure South Africans did not miss out because Christmas fell on a Sunday. When public holidays fall on a Sunday, workers are entitled to the following day off – which in that case was already a holiday, the Day of Goodwill.

The Financial Markets Liaison Group – a joint initiative between the Reserve Bank‚ National Treasury‚ the five major banks‚ foreign banks‚ the JSE and Strate – is formalising the processes to be followed on a short notice holiday.

Among the processes agreed, some transactions will be conducted on the day, including the Reserve Bank’s main repo or debenture auctions. Other trades will include the reinvestment of investors’ returns on “maturities and coupons received” – in line with the JSE, which has confirmed that such holidays will be treated as normal trading days.

But trades will be limited and concluded by 1pm. And, “when appropriate, the market will pause trading as a show of respect”. Staff working on the days “should be critical staff only”, to avoid labour or legal problems. On election days, all staff “should have the opportunity to cast their vote”. The opening of bank branches for the convenience of clients would be “a discretionary decision”. – Ethel Hazelhurst