From an international regulatory and supervisory perspective, standard-setting bodies, such as the Financial Stability Board and the Basel Committee on Banking Supervision, continued their respective processes of developing and issuing guidance and standards to strengthen the resilience of the financial sector in general and the banking sector in particular. The Department, as always, closely monitored and considered developments on the international regulatory and supervisory fronts in an on-going effort to promote the soundness of the domestic banking sector through the effective and efficient application of international regulatory and supervisory standards.
Basel Capital Accord
Core Principles for effective Banking Supervision
On 26 June 2004, the Basel Committee issued the publication titled International Convergence of Capital Measurement and Capital Standards: A Revised framework, commonly referred to as ‘Basel II’. It represents the culmination of more than five years’ work by the Basel Committee.
Basel II seeks to set significantly more risk-sensitive capital requirements (in respect of operational risk as well) and is aimed at greater international convergence through capital requirements and better disclosure, thus enhancing the role of market discipline; and to ensure improved supervisory processes and procedures.
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South Africa's implementation of Basel II.
The Basel II framework has been subject to continuous refinement, resulting in what is commonly referred to as Basel III.
Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:
- improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
- improve risk management and governance
- strengthen banks' transparency and disclosures.
The reforms target:
- bank-level, or microprudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress.
- macroprudential, system wide risks that can build up across the banking sector as well as the procyclical amplification of these risks over time.
The compilation of documents that form Basel III is available at the following link: Basel III
Regulatory Consistency Assessment Programme (RCAP)
Full, timely and consistent implementation of the Basel standards (i.e. Basel II, Basel 2.5 and Basel III) within the internationally agreed timelines is fundamental to raising the resilience of the global banking system.
As part of its post-crisis reform efforts, the Basel Committee established the Regulatory Consistency Assessment Programme (RCAP) to assess members’ implementation of the Basel standards. The assessments are conducted by a team of regulatory specialists from other Basel Committee member countries. The objective of the RCAP is not to assess individual banks or system-wide preparedness to meet Basel standards, but rather to assess the consistency of domestic regulations with Basel standards and prescribed phase-in periods.
South Africa was also subjected to an RCAP assessment, which commenced during the latter part of 2014. The RCAP for South Africa focused on both risk-based capital and Basel III standards on liquidity.
The outcome of South Africa’s assessment was published on 15 June 2015.
The local implementation of the Basel III-framework (including Basel 2 and 2.5) was found to be "compliant" with the Basel standards as all 14 components were assessed as "compliant". South Africa was also assessed as "compliant" with the Basel LCR standards, including the LCR regulation and the LCR disclosure standards.
The full reports are available at:
The Core Principles for Effective Banking Supervision, developed by the Basel Committee on Banking Supervision (the Committee) in cooperation with fellow supervisors, have become de facto the standard for sound prudential regulation and supervision of banks. The Core Principles are mainly intended to help countries assess the quality of their systems and to provide input into their reform agenda.
An assessment of the current situation of a country’s compliance with the Principles can be considered a useful tool in a country’s implementation of an effective system of banking supervision.
The IMF conducted an assessment of the current state of implementation in South Africa of the Core Principles as part of a Financial Sector Assessment Programme (FSAP). The detailed assessment report on South Africa’s compliance with the Core Principles was published in March 2015 and a summary was included as part of South Africa’s Financial System Stability Assessment.
Key findings from the assessment are as follows:
• South Africa has a high level of compliance with the Core Principles; and
• the Department has made significant improvements to its supervisory framework since the previous assessment conducted in 2010.