Banks Amendment Act, 2000

18 October 2000 No. 1024. 18 Oktqber 2000 It is hereby notified that the President has assented to the following Act which is hereby published for general infornlation:- Hierby word beknd gemaak dat die President ~sy goed- keuring geheg het aan die onderstaande Wet wat bier-by ter algemene inligting gepubl iseer word:— No, 36 of 2000: Banks Amendment Act, 2000. No. 36 v:~n 2000, B~\nk\vysigitlg\ \vet, 2000.” ~ No. 21663 Act No. 36,2000 GOVERNMENT Gum 18 OKTOBER 2000 BANKS AMENDMENT ACT, 2000 GENERAL EXPLANATORY NOTE: [ 1 Words in bold type in square brackets indicate omissions from existing enactments. Words underlined with a solid line indicate insertions in existing enactments. —..— — —.-—— (English text signed by the President.) (Assented to 14 October 2000.) ACT To amend the Banks Act, 1990, so as to define or further define certain expressions; to provide for the designation of more than one Deputy Registrar of Banks; to regulate the conducting of a due diligence audit of the financial condition of a bank; to substitute a process of review for a process of appeal against decisions of the Registrar of Banks; to make further provision regarding the use of a name by a bank or by a foreign institution that conducts the business of a bank by means of a branch in the Republic; to prohibit the appointment of an employee of a bank as chairperson of the audit committee of that bank or the appointment of the chairperson of the board of directors of a bank as a member of the audit committee of that bank; to do away with the process of judicial management of a bank that is in financial difficulties and, instead, to regulate the process of curatorship of such a bank more comprehensively; to increase, and to further regulate the making of regulations with regard to, the minimum capital and unimpaired reserve funds required to be maintained by a bank, including a bank of which the business includes or consists solely of trading in financial instruments; to charge the controlling company in a banking group with the responsibility to ensure the maintenance of a certain aggregate of the respective amounts of minimum capital and reserve funds required to be maintained by the respective entities constituting such banking group; to extend the Registrar of Banks’ discretion to exempt a bank from the prohibition on the pledging or encumbering of its liquid assets; to introduce further safeguards in respect of large exposures constituting credit risks to banks and to apply such safeguards also to controlling companies, local branches of foreign banking institutions and foreign branches of local banks; and to create and prescribe penalties for certain further offences; and to provide for incidental matters. B E IT ENACTED by the Parlitiment of the Republic of South Africa, as follows:— Amendment of section 1 of Act 94 of 1990, as amended by Government Notice R.1765 of 30 ,July 1991, section 1 of Act 42 of 1992, sections 1 and 25 of Act 9 of 1993, section 1 of Act 26 of 1994 and section 1 of Act 55 of 1996 5

1. Section 1 of the Banks Act, 1990 (hereinafter referred to as the principal Act), is hereby amended- (<L) by the insertion in subsection ( I ) after the definition of “’bank’” of’ the t’ollowing definitions: I,1 I 4 No. 21663 GOVERNMENT GAZETTE, 180 KTOBER 2000 Act No. 36.2000 BANKS AMENDMENT ACT, 2000 “ ‘banking group’ means a group consisting of two or more persons, whether natural or juristic persons, that are predominantly engaged in financial activities and one or more of which is a bank and— {a) each of which persons is an associate, as defined in section 37(7), of any one of the others; or (b) which persons are so interconnected that should one of them experience financial difficulties, another one or all of them would likely be adversely affected, irrespective of whether any of those persons is domiciled in the same country as any of the others; ‘branch’ means an institution that is not a public company as contemplated in section 11( 1), but by means of which a foreign institution conducts the business of a bank in the Republic under an authorization referred to in section 18A; ‘branch of a bank’ means an institution by means of which a bank conducts the business of a bank outside the Republic:”’; — . .— (bj by the ~~.bs:itu~i~n subsection ( 1 ) for the definition of “board of appeal” of 5 10 15 the following definition: ‘board of [appeal] review’ means the board of [appeal] review established by section 9(2);”; 20 (c) by the substitution in subsection (1) for paragraph (N of the definition of “liquid assets” of the foIlowing paragraph: “~) [stocks issued under section 19 of the Exchequer Act, 1975 (Act No. 66 of 1975), with a maturity date of not more than three years to the last redemption date] securities issued by virtue of section 66 of the Public Finance Management Act, 1999 (Act No. I of 1999);”; 25 (d) by the insertion in subsection (1) after the definition of “prescribed” of the following definitions: 30 “ ‘primary share capital’ means capital obtained through the issue of ordirmy shares, non-redeemable non-cumulative preference shares or prescribed categories of preferred securities, excluding such ordinary shares, non-redeemable non-cumulative preference shares or prescribed categories of preferred securities issued in pursuance of the capitaliza- tion of reserves resulting from a revaluation of assets; ‘primary unimpaired reserve funds’ means funds obtained from actual earnings or by way of recoveries, premiums on the issue of ordinary or non-redeemable non-cumulative preference shares or a surplus on the realization of capital assets, and which have been set aside as a general or special reserve, are disclosed as such a reserve in the financial statements 40 of the bank concerned and are available for the purpose of meeting liabilities of or losses suffered by the bank, but does not include any fund required to be maintained in terms of any other law;”; 35 (e) by the insertion in subsection (1) after the definition of “regulation” of the following definitions: 45 “ ‘Regulations relating to Banks’ means the Regulations relating to Banks as amended or re-enacted from time to time under section 90; ‘Regulations reIating to Banks’ Financial Instrument Trading’ means the Regulations relating to Banks’ Financial Instrument Trading as published by Government Notice No. R. 1058 of 2 I August 1998, and as amended 50 from time to time;”; (~) by the insertion in subsection (1) after the definition of “Reserve Bank” of the following definitions: “ ‘secondary capital’ means a prescribed percentage of capital obtained through the issue, with the prior written approval of the Registrar and in 55 accordance with conditions approved by the Registrar in writing and on such further conditions, if any, as may be prescribed, of— (a) cumulative preference shares; (b) ordinary shares, or preference shares other than cumulative preference shares, issued in pursuance of the capitalization of 60 reserves resulting from a revaluation of assets; and (L) prescribed categories of debt instruments; ‘secondary unimpaired reserve funds’ means— (a) such fund~. obtained from actua] e:umings or by wtry of recoveries, as may be prescribed and which hate been set aside. but which are 65 —— 6 No. 21663 GOVERNMENT GAZETTE, 18 OKTOBE17 2000 Act No. 36, 2000 BANKS AMENDMENT ACT, 2000 (b) (c) (d) not disclosed as a general or special reserve in the financial statements of the bank concerned; a prescribed percentage of the amount of any surplus resulting from a revaluation of assets and determined as prescribed; a prescribed amount of general provisions held against unidentified and unforeseen losses; and funds oktained by way of premiums on the issue of cumulative preference shares-or debt ins-truments issued in accordance with the prescribed conditions, whether or not such funds are disclosed as a general or special reserve in the financial statements of the bank concerned, 5 10 but does not include any fund required to be maintained in terms of any other law;”: and (s) by the insertion in sllbsection (1) after the definition of “subsidiary” of the following definition: “ “tertiary capital’ me:~n-- (a) accrued current-period l~ncapl[ali.zed net profits derived from . . . ..——. -. . ..—— trading activities; or (b) capital obtained by means of unsecured subordinated loans negoti- ated, subject to such conditions as may be prescribed;”. ----1” 20 Amendment of section 4 of Act 94 of 1990

2. Section 4 of the principal Act is hereby amended by the substitution for subsection (2) of the following subsection: “(2) The Reserve Bank may, subject to the approval of the Minister, designate [an officer or employee] so many officers or employees in its service as it may deem necessary, but not exceeding four, as Deputy [Registrar] Registrars of Banks, who shall, subject to the control and directions of the Registrar, be competent to perform any function which the Registrar is permitted or required to perform.”. 25 Amendment of section 7 of Act 94 of 1990, as amended by section 3 of Act 9 of 1993 30

3. Section 7 of the principal Act is hereby amended by the addition of the following subsections: “(3) No due diligence audit of the financial condition of any bank shall be conducted without the Registrar first having been notified in writing of the intention to do so. (4) The person at whose request a due diligence audit of the financial condition of a bank has been conducted shall furnish the Registrar with a copy of the audit report. (5) No person shall without the written consent of the Registrar disclose to any other person, except to the bank whose financial condition was the subject of the due diligence audit. any information contained in a report referred to in subsection (4).”. 35 40 Substitution of section 9 of Act 94 of 1990, as amended by section 2 of .4ct 42 of 1992, section 4 of Act 9 of 1993 and section 4 of Act 26 of 1994

4. The following section is hereby substituted for section 9 of the principal Act: 45 “Review of decisions of Registrar 9. ( 1 ) Any person aggrieved by a decision taken by the Registrar under a provision of this Act may within the prescribed period and in the prescribed manner and upon payment ot’ the prescribed fees [appeal against such 8 N(). 21663 GOVERNMENT GAZE’tTE, 18 OKTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT, 2000 decision to the board of appeal] ap ply for a review of that decision by the board of review established by subsection (2). (2) For the purpose of this Act, there is hereby established a board of’ [appeal] review which shall consist of [five] three members, appointed by the Minister and of whom— (cl) one shall be appointed on account of his knowledge of law and shall be the chairman; [three] one shall be [persons] a person who n the opinion of the Minister~ave] has wide experience of, and [are] ~ knowledgeable about the latest d=elopments in, the banking industry; and one shall be a person registered as an accountant and auditor under section 15 of the Public Accountants’ and Auditors’ Act, 1991 (Act No. 80 of 1991), and who in the opinion of the Minister has wide experience of, and is knowledgeable about the latest developments in, the accountants’ and auditors’ profession. (b) (c) 5 10 15 (2A) In any review under subsection (1), the board of review is, so~t to the provisions of subsection (8), confined to establishii]~ whether or not, in the taking of the relevant decision, the Registrar exercised his discret= properly and in good faith. —._.—- -. [(3) For the purposes of the hearing of every appeal in terms of 20 subsection (l), the board of appeal shall be constituted as follows, namely— (a) the chairman; (b) at least two of the members appointed under subsection (2)(b), designated by the chairman; and 25 (c) the member appointed under subsection (2)(c), and any reference to the board of appeal in subsections (4), (7), (8), (9), (10), (11), (12) and (13) shall be deemed to be a reference to the board of appeal as so constituted.] (4) If before or during [the hearing of any appeal in terms ofl q 30 review under subsection (1) it transpires that any member of the board of [appeal] review has any direct or indirect personal interest in the outcome of that [appeal] review, such member shall recuse himself and he shall be ret)laced bv [— (aj in th~ case of the member referred to in subsection (2)(a), a person 35 temporarily appointed, subject to the provisions of that subsec- tion, by the Nlinister for the purposes of the hearing of that appeal; in the case of a member referred to in subsection (2)(b.), one of the other members referred to in that subsection or, if all the members 40 referred to in subsection (2)(b) have been designated as contem- plated in subsection (3)(b), a person temporarily appointed, subject to the provisions of subsection (2)(b,), by the Minister for the purposes of the hearing of that appeal; or in the case of the member referred to in subsection (2)(c), a person 45 temporarily appointed, subject to the provisions of that subsec- tion, by the Minister for the purposes of the hearing of that appeal] a person temporarily ap pointed, subject to the provisions of subsection (2), by the Minister for the purposes of the review. (b) (c) (4A) If before or during any review under subsection ( 1), it tmnspires that any member of the board of review will, due to illness, absence from the Republic or for any other bonajde reason be unable to participate or continue to participate in that review, he shall be replaced by a person temporarily appointed. subject to the provisions of subsection (2), by the Minister for the purposes of the review. (5) A member of the board of [appeal] review shall hold oftice for a period of three years and shall on the expiration of his term of office be eligible for reappointment. 50 55 (6) Any casual vacancy that occurs on the board of [appeal] review shall be filled by the appointment by the Minister, subject to the provisions of 60 10 No. 21663 GOVERNMENT GAZETTE, 18 OKTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT, 2000 subsection (2), of another member, and any person so appointed shall hold office for the unexpired portion of the period of oflice of his predecessor. (7) [An appeal] A review under subsection (1) shall [be heard] take *on the date and at the place and time fixed by the board of [appeal] review, which shall [previously] give notice in writing [notify] ~ the 5 [appellant] applicant as well as the Registrm thereof. (8) The board of [appeal] review may for the purposes of [an appeal lodged with it] a review under subsection (1 )— (a) summon any person who, in its opinion, may be able to give material information [concerning the subject of the appeal] for the purposes IO of the review or who it believes has in his possession or custody or under his control any document which has any bearing upon the [subject of the appeal] decision under review, to appear before it at a time and place specified in the summons, to be interrogated or to produce that document, and retain for examination any document so 15 produced; administer an oath to or accept an affirmation from any person called as a witness at the [appeal] review. and call any person present at the [hearing of the appeal] review proceedings as a witness and interrogate him and require him to 20 produce any document in his possession or custody or under his control, and such a person shall be entitled to legal representation at his own expense. — ~ (b) (c) (9) Subject to the provisions of subsection (2A), the procedure at the [hearing of an appeal] review shall be determined by the chairman of the 25 board of [appeal] review. (10) The board of [appeal] review may after [hearing the appeal-(a)] the review confirm, set aside or vary the relevant decision of the Registrar [and (b) direct the Registrar to execute the decision of the board of appeal 30 in connection therewith]. (11) The decision of a majority of the members of the board of [appeal] review shall be the decision of that board [: Provided that in the event of an equality of votes the chairman shall have a casting vote in addition to a deliberative vote.]. (12) The decision of the board of [appeal] review shall be in writing, and a copy thereof shall be furnished to the [appellant] applicant as well as to the Registrar. 35 (13) If the board of [appeal] review sets aside any decision by the Registrar, the prescribed fees paid by the [appellant] applicant in respect of 40 the [appeal] review in question shall be refunded to him, and if the board of [appeal] review varies any such decision, it may in its discretion direct that the whole or any part of such fees be refunded to the [appellant] applicant. (14) A member of the board of [appeal] review shaIl in respect of his 45 services as such a member be paid such remuneration, including reimbursement for transport, traveling and subsistence expenses incurred by him in the performance of his functions as such a member, as the Minister may from time to time determine.”. Amendment of section 22 of Act 94 of 1990, as amended by section 7 of Act 9 of 1993 50 and section 15 of Act 26 of 1994

5. Section 22 of the principal Act is hereby amended by the substitution for subsections (1) and (2) of the following subsections: “(I) Subject to the provisions of subsection (2), an institution which is registered as a bank or a foreign institution which is authorized under section 18A to conduct 55 the business of a bank by means of a branch in the Republic shall not— I .— 12 No. 21663 GOVERNMENT GAZETTE, 18 OKTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT, 2000 (a) in the case of such bank use, or refer to itself by, a name other than the name under which it is so registered; or (b) in the case of such foreign institfiion, in respect of the branch concerned use, or refer to the branch by, a name other than the name under which the conduct of the business of a bank in the Republic was so authorized, or any literal translation or abbreviation [thereofj of such name which has been approved by the Regitrar: Provided that the Registrar may, if he deems it desirable, authorize the use of z name by which such bank or foreign institution is otherwise generally known. (2) An institution [referred to in subsection (l)] which is re~tered as a bank ..—— . . . — . ..-. ——. ..-—. may, with the consent of the Registrar, in conjunction with its registered name ~r the- name of which the use was ‘authorized by the Registrar under the proviso to subsection (1) use, or refer to itself by, the name of another bank with which it has amalgamated or all the assets and liabilities of which have, as contemplated in section 54( 1). been transferred :3 it or, in the case of a change of name, the name by which it was previously k!mwn.”’ Amendment of section 31 of Act 94 of 1990, as amended by section 24 of Act 26 of 1994

6. Section31 of the principal Act is hereby amended by the substitution for paragraph (b) of the following paragraph: “(b) in the case of a registration cancelled by the Registrar under section 23, upon expiry of 30 days after the date of the notice referred to in subsection (1), (2) or (3) of that section or, if an [appeal against] application for the review of such [cancellation] a decision to cancel was lodged with the board of [appeal] review in terms of section 9 before the expiry of the said 30 days and the board of [appeal] review has confirmed such cancellation, upon the date on which the institution concerned is notified of such confirmation;”. Amendment of section 49 of Act 94 of 1990

7. Section 49 of the principal Act is hereby amended by the substitution for paragraph (a) of the following paragmph: “(a) in the case of a registration cancelled by the Registrar under section 45, upon expiry of 30 days after the date of the notice referred to in subsection (1) of that section or, if an [appeal against] ap plication for the review of such [cancellation] a decision to cancel was lodged with the board of [appeal] review in terms of section 9 before the expiry of the said 30 days and the board of [appeal] review has confirmed such cancellation, upon the date on which the controlling company concerned is notified of such confirmation;”, Amendment of section 64 of Act 94 of 1990, as amended by section 41 of Act 26 of 1994 5 10 15 Z() 25 30 35

8. Section 64 of the principal Act is hereby amended by the substitution for subsection 40 (3) of the following subsection: “(3) All of the members of the audit committee may be. and the majority of such members, including the chairman of the audit committee. shall be, persons who are not employees of the bank nor of any of its subsidiaries. its controlling company or any subsidiary of its controlling company: Provided that the chairman of the board of directors of the bank shall not be appointed as a member of the audit committee.”. Amendment of section 68 of Act 94 of 1990, as amended by section 16 of Act 9 of 1993 and section 42 of Act 26 of 1994

9. Section 68 of the principal Act is hereby amended- (a) by the substitution for subsection ( 1 ) of the following subsection: 45 50 14 No. 21663 GOVERNMENT GAZETTE, 18 OKTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT, 2000 “(1) Notwithstanding the provisions of section 69 of this Act and anything to the contrary contained in the Companies Act— (u) the Registrar shall have the right to apply to a competent court for the winding-up of any bank [or for an order placing any bank under judicial management] in terms of the [said] Companies Act, and the Registrar shall have the right to oppose any such application made by any other person; (b) no person other than a person recommended by the Registrar shall be appointed by a Master of the [Supreme] ~ Court as provisional liquidator [provisional judicial manager] g liquidator [or judicial manager] of a bank; and (c) the Master shall appoint a person designated by the Registrar, who shall be a person who in the opinion of the Registrar has wide experience of, and is knowledgeable about the latest developments in, the banking industry, to assist a provisional liquidator [provi- sional judicial manager] ~r liquidator [or judicial manager] referred to in paragraph (b) m the performance of his functiu,,s in respect of the bank in question.”; (b) by the substitution in subsection (1A) for the words following on paragraph (c) of the following words: “and a copy of such letter of appointment shall be furnished by the Master to the provisional liquidator [provisional judicial manager] g liquidator [or judicial manager] concerned.”; (c) by the deletion of subsection (4); and (d) by the substitution for subsection (5) of the following subsection: “(5) Notwithstanding anything to the contrary contained in any law, the suspension, cancellation or termination of the registration of a bank while such bank, as a result of an application brought by the Registrar, is being wound up [or under judicial management] in terms of this section, shall not affect— (a) any order or appointment made, direction issued or any other thing done under this section or in terms of the Companies Act, in respect of such bank; or any power to be exercised, duty to be executed or right to be enforced in respect of such bank by the Registrar, the Master of the [Supreme] ~ Court or the provisional liquidator [provisional judicial manager] q liquidator [or judicial manager], respec- tively, by virtue of the provisions of this section or the provisions of the Companies Act, (b) .,-. and the Registrar, the Master of the [Supreme] ~ Court, the provisional liquidator [provisional judicial manager] Q liquidator [or iudicial mana~erl, res~ectivelv, shall[— Ii) in the case of such winding-up], until the affairs of the public company of which the registration as a bank has been so suspended, cancelled or terminated have been completely wound up as contemplated in section 419(1) of the Companies Act or until the winding-up is stayed or set aside by an order of a competent court [;or in the case of such judicial management, until the judicial management order is cancelled by a competent court], (ii) continue to exercise their respective powers and to perform their respective duties under this section or in terms of the Companies Act, in respect of the public company of which the registration as a bank has been so suspended, cancelled or terminated, as if such suspension, cancellation or termination had not taken place.”. 5 10 15 Z() 25 30 35 40 45 50 55 16 No. 21663 GOVERNMENT GAZETTE, 18 OKTOBER 2000 Act No. 36.2000 BANKS AMENDMENT ACT, 2000 Amendment of section 69 of Act 94 of 1990, as amended by section 8 of Act 42 of 1992, section 17 of Act 9 of 1993, section 43 of Act 26 of 1994 and section 6 of Act 55 of 1996

10. Section 69 of the principal Act is hereby amended— (a) by the substitution for paragraph (a) of subsection (1) of the following 5 paragraph: “(a) If, in the opinion of the Registrar, any bank will be unable to repay, when legally obliged to do so, deposits made with it or will probably be unable to meet any other of its obligations, the Minister may, if he deems it desirable in the public interest, with the written consent of the chief executive 05cer or the chairman of the board of directors of that bank, appoint a curator to the bank.”; (b) by the insertion of the following subsections after subsection (2): “(2A) On appointment of a curator— {a) the management of the bank concerned shall vest in the curator, subject to the supervision of the Registrar, and any other person vested with the management of the affairs of that bank shall be divested thereofi and (b) the curator shall recover and take possession of all the assets of the ., bank. (2B) The curator shall— (a) (b) (c) (d) (e) subject to the supervision of the Registrar, conduct the management contemplated in subsection (2A)(a) in such a manner as the Registrar may deem to best promote the interests of the creditors of the bank concerned and of the banking sector as a whole; comply with any direction of the Registrar; keep such accounting records and prepare such annual financial statements, interim reports and provisional annual financial state- ments as the bank or its directors would have been obliged to keep or prepare if the bank had not been placed under curatorship; convene the annual general meeting and any other meeting of members of the bank provided for by the Companies Act and, in that regard, comply with all the requirements with which the directors of the bank would in terms of the Companies Act have been obIiged to comply if the bank had not been placed under curatorship; and have the power to bring or defend in the name and on behalf of the bank any action or other legal proceedings of a civil nature and, subject to the provisions of any law relating to criminal proceed- ings, any criminal proceedings. (2C) (a) Notwithstanding the provisions of subsection (3), the curator may dispose of any of the bank’s assets in the ordinary course of the bank’s business. (b) Except in the circumstances contemplated in paragraph (a) the curator may not, notwithstanding the provisions of section 228 of the Companies Act— (i) dispose of any of the bank’s assets otherwise than in accordance with the provisions of section 54; (ii) effect a disposal referred to in subparagraph (i) unless a reasonable probability exists that such disposal will enable the bank to pay its debts or meet its obligations and become a successful concern. (2D) If at any time the curator is of the opinion that there is no reasonable probability that the continuation of the curatorship will enable the bank to pay its debts or meet its obligations and become a successful concern, he shall forthwith in writing inform the Registrar of such opinion. (2E) Any money of’ the bank that becomes available to the curator shall be applied by him in paying the costs of the curatorship and in the conduct of the bank’s business in accordance with the requirements of the curatorship and, as far as the circumstances permit, in the payment of the claims of creditors which arose before the date of the curatorship. 10 15 Z() 25 30 35 40 45 50 55 60 18 No. 21663 GOVERNMENT GAZETTE, 18 OKTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT, 2000 (2F) (a) Every disposition of its property, which if made by an individual could for any reason be set aside in the event of such individual’s insolvency, may, if made by a bank that is unable to pay its debts, be set aside by a court at the suit of the curator in the event of that bank being placed under curatorship, and the provisions of the law relating to insolvency shall mutafis rnufandis apply in respect of such disposition. (b) For tlie purposes of this subsection the event which shall be deemed to correspond with a sequestration order under the Insolvency Act, 1936 (Act No. 24 of 1936), in the case of an insolvent, shall be the presentation to the Court of the letter of appointment of the curator. (2G) The period during which any bank that is a mortgage debtor in respect of any mofigage bond is subject to curatorship in terms of this section shall be excluded in the calculation of any period of time for the purpose of determini~g whether such mortgage bond confers any preference in terms of seci;~~n 88 of the Insolvency Act, 1936, as applied to the winding-up of banks in tek.ns of this Act.”; .— (c) by the deIetion of paragraph (h) of subsection (3); (d) by the substitution for subsection (4) of the following subsection: “(4) The Minister may, at any time and in any manner, amend [or withdraw] the directions in the letter of appointment, and the powers granted by him under subsection (3) to the curator.”; (e) by the deletion of subsection (5); (fl by the substitution for subsection (6A) of the following subsection: “(6A) While a bank is under curatorship the curator shall [on the expiration of a period of one year as from the date of his appointment as such, and thereafter biannually upon the expiration of every period of six months] on a monthly basis furnish the Registrar with a written report containing an exposition of the affairs of the bank concerned and in which it is stated whether or not, in the opinion of the curator, [it is in the interest of the depositors of the bank concerned that the bank remains under curatorship] a reasonable probability exists that the bank will be able to pay its debts or to meet its obligations and to become a successful concern.”; and (g) by the addition of the following subsections: “(9) The Minister may— (a) at any time withdraw the appointment of a curator; (b) upon application by the Registrar withdraw the appointment of a curator. (10) Curatorship of a bank shall lapse upon— (a) the issue by the Minister of written notification to that effect to the curator; or (b) the winding-up of the bank in terms of the provisions of section 68 “. - 5 10 15 20 25 30 35 40 Amendment of section 69A of Act 94 of 1990, as inserted by section 44 of Act 26 of 45 1994

11. Section 69A of the principal Act is hereby amended by the deletion of subparagraph (ii) of paragraph (b) of subsection (11). Amendment of section 70 of Act 94 of 1990, as amended by section 9 of Act 42 of 1992, section 18 of Act 9 of 1993 and section 45 of Act 26 of 1994 50

12. Section 70 of the principal Act is hereby amended— (a) by the substitution for subsection (1) of the following subsection: “(1 ) For the purposes of this Act— ‘allocated capital and reserve funds’ means such amount of qualifying capital and reserve funds as may be approved and assigned by the board 55 -. .–— ., I 20 NO. 21663 GOVERNMENT GAZETI’E, 18 OKTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT. 2000 of directors of a bank as capital and reserve funds designated to provide for the risks pertaining to the particular nature of such bank’s business as contemplated in subsection (2), (2A) or (2 B), as the case may be; ‘qualifying capital and reserve funds’ means the net sum of capital and reserve funds required to be held by a bank, calculated and determined in accordance with the provisions of subsection (2), (2 P,) or (2B), as the case may be, having regard to the nature of such bank~s business.”; 5 (b) by the substitution for subsection (2) of the following subsection: “(2) @J A bank of which the business does not include trading in financial instruments shall manage its tiairs in such a way that, subject 10 to the provisions of [subsections (3) and (S)(a)] paragraph (b), the sum of its [issued] primary and secondary [share] capital and its primary and secondary unimpaired reserve funds in the Republic does not at any time amount to less than the greater of— [(a)](iJ [R50 000 000] R250 000000 or, in the case of such o bank 15 which immediately prior to the date of commencement of :!:is Act was registered as a banking institution or a building society. under a law repealed by this Act. R 1 000 000; or [(b)]~ an amount which represents a prescribed percentage of the sum of amounts calculated by multiplying the average of the 20 amounts (as shown in the returns furnished to the Registrar in terms of section 75(1 )(a)(ii)) of such different categories of— [(i)]@ assets; and [(ii)]~ other risk exposures in the conduct of its business, as may be prescribed in the Regulations relating to Banks, by the risk 25 weights, expressed as percentages, ~ prescribed in respect of such different categories of assets and other risk exposures. (b) Notwithstanding the provisions of paragraph (a)— (i) (ii) the sum of the bank’s primary share capital and primary unimpaired reserve funds shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be calculated by deducting from the amount thereof such amounts as may be prescribed; and the sum of the bank’s secondary capital and secondary unimpaired reserve funds shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be— (au) calculated by deducting from the amount thereof such amounts 30 35 as may be prescribed; and (bb) taken into account to an amount not exceeding the sum of the 40 bank’s allocated and qualifying primary share capital and allocated and qualifying primary unimpaired reserve funds.”; (c) by the insertion of the following subsections after subsection (2): “(2A) (a) A bank of wh~ch the business consists solely of trading in financial instruments shall manage its affairs in such a way that, subject 45 to the provisions of paragraph (b), the sum of its primary and secondary capital, its primary and secondary unimpaired reserve funds and its tertiary capital in the Republic does not at any time amount to less than the greater of— (i) R250 000 000; or (ii) an amount which represents the sum of amounts prescribed in the Regulations relating to Banks’ Financial Instrument Tmding in respect of such a bank’s risk exposures in the conduct of its business as may be so prescribed. 50 (b) Notwithstanding the provisions of paragraph (a)- 55 (i) the sum of the bank’s primary share capital and primary unimpaired reserve funds shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be 22 No. 21663 GOVERNMENT GAZETTE, 180 KTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT, 2000 I calculated by deducting from the amount thereof such amounts as may be prescribed; (ii) the sum of the bank’s secondary capital and secondary unimpaired reserve funds shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be— (au) calculated by deducting from the amount thereof such amounts as may be prescribed; and (bb) taken into account to an amount not exceeding the sum of the bank’s allocated and qualifying primary share capital and allocated and qualifying primary unimpaired reserve funds; (iii) the sum of the bank’s tertiary capital shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be calculated as prescribed; and (iv) the total amount of allocated and qualifying secondary capital, :!llocated and qualifying secondary unimpaired reserve funds and tertiary capital shall be determined as prescribed in the Regulations relating to Banks’ Financial Instrument Trading. (2B) (a) A bank of which the business includes trading in financial instruments shall manage its affairs in such a way that, subject to the provisions of paragraph (b), the sum of its primary and secondary capital, its primary and secondary unimpaired reserve funds and its tertiary capital in the Republic does not at any time amount to less than the greater of— (i) R250 000 000; or (ii) an amount which represents the sum of— (aa) a prescribed percentage of the sum of amounts calculated by multiplying the average of the amounts (as shown in the returns furnished to the Registrar in terms of section 75( 1 )(a)(ii)), of such different categories of— (A) assets; and (B) other risk exposures in the conduct of its business, as may be prescribed in the Regulations relating to Banks, by the risk weights, expressed as percentages, so prescribed in respect of such different categories of assets and other risk exposures; and (bb) an amount which represents the sum of amounts prescribed in the Regulations relating to Banks’ Financial Instrument Trading in respect of such of the bank’s risk exposures in the conduct of its business of trading in financial instruments as may be so prescribed. (b) Notwithstanding the provisions of paragraph (a)— (i) the sum of the bank’s primary share capital and primary unimpaired reserve funds shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be calculated by deducting from the amount thereof such amounts as may be prescribed; (ii) the sum of the bank’s secondary capital and secondary unimpaired reserve funds shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be— (au) calculated by deducting from the amount thereof such amounts as may be prescribed; and (bb) taken into account to an amount not exceeding the sum of the bank’s allocated and qualifying primary share capital and allocated and qualifying primary unimpaired reserve funds; (iii) the sum of the bank’s tertiary capital shall, in the calculation of the aggregate amount which the bank is in terms of paragraph (a) required to maintain, be calculated as prescribed; and (iv) the total amount of allocated and qualifying secondary capital, allocated and qualifying secondary unimpaired reserve funds and 5 10 15 20 25 30 35 $0 $5 50 55 60 24 No. 21663 Act No. 36,2000 GOVERNMENT GAZETTE, 18 OKTOBER 2000 BANKS AMENDMENT ACT, 2000 tertiary capital shall be determined as prescribed in the Regulations I relating to Banks’ Financial Instrument Trading.”; and (d) by the deletion of subsections (3) and (5). Insertion of section 70A in Act 94 of 1990

13. The following s!~ction is hereby inserted in the principal Act after section 70: 5 “Minimum capital and reserve funds in respect of banking group 70A. (1) Notwithstanding the provisions of section 70(2), (2A) and (2B), a controlling company shall manage its affairs in such a way that, subject to the provisions of subsection (2), the sum of the capital and reserve funds of the banking group structured under such controlling company does not at any time amount to lCSS than the sum of the amounts of the required capital and reserve funds. debt~mincd in respect of the respective entities constituting such banking gioup, in accordance with the rules and regulations of the respective regulators responsible for the supervision of those entities, plus such amount as may be prescribed by the Registrar in respect of entities that are included in such banking group but are not subject to the supervision of a regulator. (2) Notwithstanding the provisions of subsection (1), the sum of the banking group’s capital and reserve funds shall, in the calculation of the aggregate amount that the banking group is in terms of subsection (1) required to maintain, be calculated by deducting from the amount thereof such amounts as may be prescribed.”. 10 15 20 Amendment of section 72 of Act 94 of 1990, as amended by section 10 of Act 42 of 1992

14. Section 72 of the principal Act is hereby amended by the substitution for 25 subsections (3) and (4) of the following subsections: ‘L(3) A bank shall not pledge or otherwise encumber any portion of the liquid assets held by it in compliance with the provisions of subsection (1): Provided that the Registrar may [if he deems it necessary on account of any special circumstances in which a bank may find itselfl exempt [such] g bank from the 30 prohibition contained in this subsection on such conditions and to such an extent and for such a period as he may determine. [4) For the purposes of this section securities which constitute ‘liquid assets’ as defined in section 1 shall be valued as prescribed.”. Substitution of section 73 of Act 94 of 1990, as substituted by section 46 of Act 26 of 35 1994

15. The following section is hereby substituted for section 73 of the principal Act: “Large exposures 73. (1) A bank, controlling company, branch or branch of a bank— shall not make investments with or grant loans or advances or other 40 credit to any person, to an aggregate amount exceeding [an amount representing a prescribed percentage of such bank’s capital and reserves] 10 per cent of such amount of its capital and reserves as may be prescribed, without first having obtained the permission of its board of directors, or of a committee appointed for such purpose [by its 45 board of directors (at least one of the members of which committee shall be a director of the bank who is not in its employ nor in the employ of any of its subsidiaries, its controlling company or any subsidiary of its controlling company)] (for the composition of which committee the prior written approval of the 50 I I xl NO. 21663 GOVERNMENT GAZETTE, 180 KTOBER 2000 Act No. 36,2000 BANKS AMENDMENT ACT, 2000 Registrar has to be obtained), to make such investments or to grant such loans, advances or other credit; and (b) shall in the event of the aggregate ~ourt{ of investments, loans. advances and other credit contemplated in paragraph (a) exceeding 800 per cent of such an amount of its capital and reserves as may be prescribed, be subject to such additional capital requirements as may be prescribed. (2) Notwithstanding anything to the contrwy contained in this Act, a (b) bank, controlling company, branch or branch of a bank— (a) . . shall not w~thottt the prior written approval of the Registrar nmke an investment with or grant a loan, advance or other credit to any private sector non-bank person, which transaction, either alone or together with any previous transaction or transactions entered into by it with that private sector non-bank person, results in the bank, controlling company, branch or branch of a bank being expospd to that private sector non-bank person to an amount exceedin~ 25 ~m cent of :1 prescribed amount; shall in such manner and on such a form as may be prescribed report to the Registrar whenever it makes an investment with or grants a loan or advance or other credit to any person other than a private sector non-bank person, which transaction, either alone or together with any previous transaction or transactions entered into by it with that other person, results in the bank, controlling company, branch or branch of a bank being exposed to that other person up to an amount exceeding 25 per cent of a prescribed amount; and shall, in the event of the Registrar granting such written approval as contemplated in paragraph (a), be subject to such additional capital requirements as may be prescribed. (3) For the purposes of this section— (c) (a) ‘person’ includes— — 30 [(a)l(iJ [(b)](ii) two or more persons, whether natural or juristic persons, the respective exposures to whom constitute a single exposure because of the fact that one of them directly or indirectly exercises control over the other or others; and two or more persons, whether natural or juristic persons, 35 between whom there exists no relationship of control as contemplated in [paragraph (a)] subparagraph (i), but the respective exposures to whom are to be regarded as a single exposure because of the fact that they are so interconnected that should one of them experience financial difficulties, 40 another one or all of them would be likely to experience a lack of liquidity; and sector non-bank ~rson’ means a person as defined in (b) ‘private paragraph (a) but does not include— (i) the central government or other public sector bodies; (ii) a bank; (iii) a mutual bank; (iv) a branch of a bank; (v) a branch; (vi) a foreign institution that, under an authorization referred to in section 18A, conducts the business of a bunk by means of a branch in the Republic; 45 50 (vii) a controlling company; or (viii) any other person designated by the Registrtir. ”. Amendment of section 91 of Act 94 of 1990, as amended by section 23 of Act 9 of 1993 and section 56 of Act 26 of 1994 55

16. Section 91 of the principal Act is hereby amended by the substitution for paragraph (b) of subsection (1) of the following paragraph: 28 No. 21663 Act No. 36, 2000 GOVERNMENT GAZETTE, 180 KTOBER 2000 BANKS AMENDMENT ACT, 2000 “(b) contravenes or fails to comply with a provision of section 7(3), (4) or (5), 34, 35, 37(l), 38(l), 39,41, 42(l), 52(1) or (4), 53,55,58,59, 61(2), 65,66,67, 70(2), (2A) or (2 B), 70A, 72, 73, 75, 76, 77, 78(1) or (3), 79, 80 or 84(2),”. Short title

17. This Act is called the Banks Amendment Act, 2000. 5 I I I I .—