The banking industry and financial sector regulators failed to convince MPs from across the political spectrum on Tuesday about industry transformation.
Representatives from the Prudential Authority of the Reserve Bank, the Financial Sector Conduct Authority, Banking Association SA (Basa), Nedbank, Standard Bank, Absa, FNB, Investec and Capitec appeared before a joint meeting of parliament’s trade, industry & competition committee and the standing committee on finance to report on lending practices and progress made in transforming the sector, which has total assets of about R8-trillion.
The banks, represented by CEOs or senior executives, were at pains to emphasise their positive role in promoting economic development and transformation, highlighting the amounts lent for home, student and small business loans and for infrastructure, productive economic activity, development finance and broad-based BEE financing.
Absa CEO Charles Russon emphasised that there was a limit as to what the banks could do. What was needed was economic growth fuelled by public-private partnerships, he said.
But MPs said the transformation figures provided by Basa MD Bongiwe Kunene did not reflect the experience of banking clients who experienced discrimination, differential interest rates based on race and a white-dominated industry.
A number of MPs — particularly those from MK — also questioned the closure of bank accounts without the banks providing reasons. They probably had in mind the experience of Iqbal Survé’s Sekunjalo group whose accounts were closed by several major banks.
Some MPs were furious with the Prudential Authority for its court application for the provisional liquidation of Ithala Bank despite the resolution by the finance committee last year that the bank should be revitalised.
Finance committee chair Joe Maswanganyi said another round of engagements would be held with the regulatory authorities to delve deeper into the issues raised by MPs.
Kunene told MPs that nine of the biggest banks in the country (representing 83% of industry assets) had achieved level one broad-based BEE status. On key metrics such as black ownership, economic interest and some management targets, banks were ahead of financial sector code targets.
Banks were opposed to unfair discrimination, she emphasised, and no Basa member — the association represents 30 local and international banks — had been found guilty of discrimination in a court of law.
Kunene noted that the Financial Sector Transformation Council decided every five years what metrics would be measured to assess transformation and it might be necessary to change these to incorporate MPs’ concerns.
Transformation
Kunene gave details of the 2024 transformation in banking report, which will be published Wednesday and covers the years 2020 to 2023 inclusive. This showed, she said, that there had been a consistent improvement in key transformation metrics year on year except for the period of the Covid pandemic. The data for the report was supplied by 20 banks accounting for 96% of all bank assets.
On a weighted basis in 2023 blacks had 38% of voting rights (17% women), 29% economic interest (13% women) and the economic interest of designated black groups was 6%; 90% of junior bank managers (62% of all junior bank managers are black women), 78% (38% of total are black women) of middle managers and 51% (25% women) senior managers are black. Black directors represented 48% (24% women) of the total.
Kunene said banks had spent R5.6bn on skills development in 2023, R3.2bn of which was spent on black women. They had provided R366bn for investment in manufacturing, R215bn in infrastructure, R209bn in agriculture, R325bn in sustainable development projects and R261bn to small businesses.
Banks spent R1.8bn on supplier development in 2023, R216m on enterprise development and the sector’s preferential procurement spend on black-owned businesses reached R133bn. Banks had 23-million qualifying product accounts to facilitate economic inclusion in 2023.
One of the challenges highlighted by Kunene was that cybercrime could deter the adoption of digital banking.
On the closure of banking accounts, Kunene said that in 2024 the banking division of the National Financial Ombud Scheme of SA received only 316 customer complaints regarding the closure of bank accounts — 3,98% of the total complaints received that year. Banks had to adequately manage risk to prevent their accounts being used for criminal activity
“Providing financial services and products is the business of banks. Closing bank accounts if not merited is counterproductive,” she said.
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