Regulatory Alerts2011-05-24
South African Reserve Bank Guidance Note 3/2011 on Covered Bonds
The South African Reserve Bank issued Guidance Note 3/2011 to formally prohibit banks and foreign branches in South Africa from issuing covered bonds or engaging in equivalent structured transactions. The regulator determined that such structures subordinate depositor interests to bondholders, which is materially inconsistent with the Bank Supervision Department's statutory duties under the Banks Act. This policy remains in effect despite references to covered bonds in international frameworks like Basel III, as the Office prioritizes domestic banking system soundness and systemic risk minimization.
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