Regulatory Alerts2016-08-08
G7/2016: Capital Arbitrage Transactions
The South African Reserve Bank’s Registrar of Banks issued Guidance Note G7/2016 to prohibit banks and related institutions from engaging in capital arbitrage transactions that unduly offset regulatory adjustments. The directive targets complex, often artificial arrangements—including structured securities, sales contracts, and collateralized derivatives—that risk overestimating eligible capital without proportionally reducing systemic risk. Affected institutions must ensure these transactions undergo rigorous scrutiny for genuine risk transfer and capital adequacy, while returning a signed acknowledgement of receipt to the Registrar.
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