Regulatory Alerts2014-06-10
Interpretation of Specified Conditions for Issuing Instruments or Shares Ranking as Additional Tier 1 and Tier 2 Capital
The South African Reserve Bank’s Office of the Registrar of Banks interprets the regulatory definition of “associated” to clarify ownership restrictions for instruments or shares ranking as additional tier 1 and tier 2 capital. Under this interpretation, such capital instruments must be held outside the bank or controlling company and their related parties, explicitly excluding external shareholders over whom no control or significant influence is exercised. Institutions must apply this clarification and return a duly completed, dual-signed acknowledgement of receipt to the Registrar alongside their independent auditors.
[Logo: South African Reserve Bank]
South African Reserve Bank From the Office of the Registrar of Banks
C6/2014
2014-06-02
To: All banks, controlling companies, branches of foreign institutions, eligible institutions and auditors of banks or controlling companies
Circular 6/2014 issued in terms of section 6(4) of the Banks Act, No. 1994 of 1990
Interpretation of specified conditions for the issuing of instruments or shares which rank as additional tier 1 capital and tier 2 capital
Executive summary
The Office of the Registrar of Banks (this Office) hereby informs all relevant persons of the interpretation of the definition of ‘associated’, as set out in regulations 38(13)(b)(iv)(E) and 38(14)(a)(iv)(F) of the Regulations relating to Banks (the Regulations), in order to clarify who may hold or acquire instruments or shares which rank as additional tier 1 or tier 2 capital.
1. Introduction
1.1 In terms of regulations 38(13)(b)(iv)(E) and 38(14)(a)(iv)(F) of the Regulations, instruments or shares which rank as additional tier 1 capital and tier 2 capital respectively shall not be held or acquired by the bank or any person related to or associated with the bank or over which the bank exercises or may exercise control or significant influence.
2. Interpretation of ‘associated’ in the context of regulations 38(13)(b)(iv)(E) and 38(14)(a)(iv)(F) of the Regulations
2.1 In the context of regulations 38(13)(b)(iv)(E) and 38(14)(a)(iv)(F) of the Regulations only, ‘associated’ relates to the relevant bank or controlling company or a related party over which the bank and/or controlling company exercises or may exercise control or significant influence. The term therefore excludes a shareholder of the bank or controlling company itself; as the bank or controlling company has no control or significant influence over such a shareholder.
PO Box 8432 Pretoria 0001 · 370 Helen Joseph Street Pretoria 0002 · South Africa · Tel +27 12 3133911/0861 12 7272 · Fax +27 12 3133758 · www.reservebank.co.za
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3. Acknowledgement of receipt
Two additional copies of this circular are enclosed for the use of your institution’s independent auditors. The attached acknowledgement of receipt, duly completed and signed by both the chief executive officer and the said auditors, must be returned to this Office at the earliest convenience of the aforementioned signatories.
Yours sincerely
[Signature]
René van Wyk Registrar of Banks
The Previous circular issued was Banks Act Circular 5/2014, dated 14 April 2014