READ: Time running out for banks, Yunus Carrim warns
By Carol Paton and Linda Ensor
SA’s financial sector is to come under intense political scrutiny in 2017 and must transform voluntarily or be transformed by the government, the chairman of Parliament’s finance committee, Yunus Carrim, warned on Wednesday. Carrim, who was chairing a marathon session in Parliament on the Financial Intelligence Centre (FIC) Amendment Act, which has been sent back to Parliament by President Jacob Zuma for further deliberation, said the committee would hold public hearings in March into the transformation of the sector.
In an interview after the meeting Carrim said: “We are acutely aware of the need to transform the financial sector. We urge the banks to transform and if they don’t do so through engagements with government and Parliament, it will be done for them through popular action that will reduce their prospects of having an effective say.”
Carrim told the committee and represented parties – which included the Banking Association of SA – that “time is fast running out” and the issue was already high on the agenda of the ANC’s national conference in March. Transformation was more than deracialisation — it was unacceptable, for instance, that four banks controlled 90% of the market, he said.
The public hearings, which are scheduled for March 14, will look at “the Financial Sector Charter Implementation & Other Aspects of Transformation of the Financial Sector”, says the committee’s programme. The move can be expected to unsettle the banks, which until now have been secure in the notion that the charter, and in particular its ownership targets, was adequate. The sector has also believed itself to be protected from further government pressure as it is uniquely covered by a special “once-empowered, always-empowered” clause. Carrim’s announcement follows on strong indications in government circles that Zuma remains intent on establishing a commission of inquiry into the banks. Last year, Mineral Resources Minister Mosebenzi Zwane fallaciously announced that the Cabinet had agreed to set up such a commission. While he was rebuked by Zuma at the time, the idea resurfaced at the Presidency after the leaking of the public protector’s report into the Absa lifeboat.
On Wednesday, Carrim came under great pressure for his committee to consider the bill in its entirety and not just the issue raised by Zuma. However, he maintained the committee needed to look at the constitutionality of those provisions requested by the president.
The concerns about the banking sector and its dominance by the big four banks would have to be addressed in a separate process from that of the bill, Carrim said. The hearing will address, among other things, claims by Black Business Council (BBC) president Danisa Baloyi that commercial banks had closed the bank accounts of about 10 BBC members without giving them any reason. The BBC is opposed in particular to the bill’s provision that politically influential persons — such as government employees and those doing business with the state — be subject to more vigilant monitoring and supervision by banks.
But Banking Association of SA MD Cas Coovadia strongly rejected the BBC’s claims that the bill would give banks the power to undertake inspections on behalf of the FIC and other regulatory authorities. Coovadia pointed out that it was not banks that undertook inspections to ensure compliance with the Financial Intelligence Centre Act (Fica) but the centre’s inspectorate.
He also rejected Baloyi’s assertion that the bill gave banks absolute freedom to treat their clients as they wished. Banks were very heavily regulated to ensure compliance with the law, he said. Assertions that the bill gave the banks more power were incorrect.
Carrim gave much leeway for the expression of views beyond the issue that prompted Zuma to send back the bill to Parliament — the provision for warrantless searches. Parliament’s joint rules stipulate that it can only deal with the issue on which a bill was referred back by the president and cannot open itself up for general revision. But he concluded the proceedings by saying that the committee would have to abide by the rules of Parliament and that if the executive wanted to introduce further amendments to the act it could do so at a later stage. This view was endorsed by Treasury legal adviser Jeremy Gauntlett SC, who said that Zuma only had two alternatives when the bill was sent back to him with amendments — either he could sign it or if he continued to disagree with it he could send it to the Constitutional Court.
The bill as a whole could only be challenged in the Constitutional Court once it had been promulgated. The security cluster, the BBC and the Progressive Professionals Forum made a bid to invalidate the constitutionality of the FIC’s inspection powers.
They argued the Constitution vested the power to investigate criminal activities such as money laundering and the financing of terrorism in the South African Police Service and security agencies and not the centre.
But the attorney appearing for Parliament, Steven Budlender, said there was no constitutional impediment to assigning investigating powers to the centre and other regulatory bodies.
Regulatory bodies such as the Film and Publications Board, the Independent Communications Authority of SA and the Estate Agents Affairs Board had powers to investigate and search to ensure compliance in their specific industries. These were not general powers.
The committee plans to deliberate on the amendment bill on Wednesday.