The Financial Sector Conduct Authority (FSCA) has released for public comment its draft strategy on transformation in the financial services industry.
In a press statement issued today, the FSCA says: “A strategic objective of the FSCA is to promote the development of an innovative, inclusive, and sustainable financial system. This includes supporting the transformation of the financial sector. The FSCA today publishes for public comment its draft strategy for promoting transformation of the financial sector in South Africa: ‘FSCA Strategy for Supporting Financial Sector Transformation.”
The overall policy framework for broad-based black economic empowerment in South Africa is the Broad-Based Black Economic Empowerment Act of 2003 (B-BBEE Act). Under this, the Financial Sector Code (gazetted in 2012 and subsequently revised and gazetted in 2017) reflects the accord reached by key financial sector stakeholders regarding their joint commitment to fostering B-BBEE in the financial sector.
In recognition of the need for a stronger focus on transformation by financial sector regulators, the Financial Sector Regulation Act of 2017 (FSR Act), which established the FSCA, includes as an object of the Act the promotion of transformation of the financial sector. The Conduct of Financial Institutions Bill (COFI), expected to be tabled in Parliament this year, includes key proposals to further strengthen the powers of the FSCA in relation to transformation.
In its release, the FSCA says its draft strategy aims to:
• Outline the FSCA’s approach to promoting financial sector transformation within the existing policy framework – the FSR Act, B-BBEE Act, and Financial Sector Code; and
• Outline an approach for the FSCA to promote transformation under the future COFI framework.
Key COFI proposals include:
• Promoting transformation to be made an explicit function of the FSCA, with the FSCA able to issue conduct standards in this regard;
• Requiring financial services companies to promote transformation in a manner reasonably consistent with a transformation plan, which must be aligned to the achievement of tangible targets informed by the Financial Sector Code; and
• Enabling the FSCA to issue directives and use its other supervisory and enforcement powers to ensure that a financial institution adheres to commitments made through its transformation plan, and that its governance frameworks in relation to transformation are adequate and adhered to.
“These proposals will strengthen the overall framework for transformation in the financial sector, by allowing the FSCA to exercise reasonable supervisory and enforcement measures against financial institutions that do not uphold commitments to transformation,” the FSCA says.
Financial sector transformation and financial inclusion are mutually supportive objectives, the authority says. The FSCA’s financial inclusion strategy, which can be read in conjunction with the draft transformation strategy is available here.
The FSCA invites comments from all interested stakeholders on the draft transformation strategy document.