MEMORANDUM OF UNDERSTANDING

between

The South African Reserve Bank

and

The Prudential Authority

Jointly hereinafter referred to as the “Parties”

(In compliance with sections 26 and 27, read with sections 76 and 77 of the Financial Sector Regulation Act, 2017, Act No. 9 of 2017)

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Contents

1. Introduction ................................................................................................................... 3
2. Purpose ......................................................................................................................... 3
3. Definitions and Interpretation ....................................................................................... 4
4. Statutory co-operation in relation to the SARB’s financial stability responsibilities ........ 4
5. Minimising the duplication of effort and expense ........................................................ 7
6. Specific areas of co-operation and collaboration ......................................................... 7
7. Policies and strategies .................................................................................................. 8
8. Regulations and Regulatory instruments ...................................................................... 8
9. Licensing ...................................................................................................................... 9
10. Enforcement and administrative action ...................................................................... 9
11. Significant owners ..................................................................................................... 10
12. Financial conglomerates ........................................................................................... 10
13. Recovery and curatorship .......................................................................................... 10
14. Domestic, regional and international fora .................................................................. 11
15. General provisions ..................................................................................................... 11
    Annexure A - Consistent regulatory strategies ............................................................... 14
    Annexure B - Regulations and regulatory instruments ................................................... 16
    Annexure C- Licensing of financial institutions and market infrastructure ...................... 17
    Annexure D - Supervisory on-site inspections and investigations ................................. 19
    Annexure E - Enforcement and administrative action ................................................... 20
    Annexure F - Recovery and curatorship ........................................................................ 22
    Annexure G - Reporting by financial institutions, including statutory reporting and data collection measures ................................................................................................... 24
    Annexure H - Information sharing ................................................................................ 25

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1. Introduction

1.1.

Sections 26 and 27 of the Financial Sector Regulation Act, 2017 (Act No.9 of 2017) (FSR Act) requires financial sector regulators to co-operate and collaborate with the South African Reserve Bank (SARB), and with each other to maintain, protect and enhance financial stability and to enter into a Memorandum of Understanding (MoU) to give effect to such co-operation and collaboration.

1.2.

Sections 76 and 77 of the FSR Act requires the SARB and financial sector regulators to co-operate and collaborate when performing their functions in terms of financial sector laws, the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001) (FICA) and the National Credit Act, 2005 (Act No. 34 of 2005) (NCA) and to enter into a written MoU to give effect to such co-operation and collaboration.

1.3.

The FSR Act, among other things generally governs the relations between the Prudential Authority (PA) and the SARB. This MoU seeks to achieve the required co-operation and collaboration.

1.4.

The Parties record that the provisions of this MoU will not impose any more onerous or other obligations on the Parties other than those provided for in the FSR Act or that may reasonably be required for co-operation and collaboration.

2. Purpose

2.1.

This MoU embodies the understanding of the Parties with regard to a relationship of mutual co-operation, support and assistance among the Parties, and serves to strengthen and formalise the existing relationships among the Parties in the areas of information sharing, training, inspections, investigations and the co-ordination of supervision and enforcement of compliance with the relevant financial sector laws by supervised entities.

2.2.

The Parties agree to provide mutual assistance and to exchange information, subject to relevant laws, and to endeavour to reach a common understanding on areas where their respective supervisory responsibilities may overlap.

2.3.

It is not the intention of the Parties that this MoU creates any legally binding obligations between them.

2.4.

The Parties agree and undertake to implement this MoU on a foundation of mutual trust and good faith.

2.5.

The Parties agree that, in order to assist and facilitate the implementation and execution of this MoU, additional or supplementary processes and procedures between two or more Parties may be documented in order to prescribe detailed practical steps and/or arrangements between the relevant Parties.

3. Definitions and Interpretation

3.1.

Words and/or expressions used in this MoU shall have the same meaning, ascribed to them in section 1(1) of the FSR Act, unless the context otherwise requires.

3.2.

The singular includes the plural and vice versa.

3.3.

The annexe to this MoU form an integral part hereof and words and expressions defined herein shall bear, unless the context otherwise requires, the same meaning in the annexe.

4. Statutory co-operation in relation to the SARB’s financial stability responsibilities

4.1.

In terms of section 26(1) of the FSR Act, the Prudential Authority (PA) must:

4.1.1.

Co-operate and collaborate with the SARB to maintain, protect and enhance financial stability;

4.1.2.

provide such assistance and information to the SARB to maintain or restore financial stability as the SARB may reasonably request;

4.1.3.

promptly report to the SARB any matter of which they become aware that poses or may pose a risk to financial stability; and

4.1.4.

gather information from, or about, financial institutions that concerns financial stability.

4.2.

In terms of section 26(2) of the FSR Act, the SARB must take into account any views expressed and any information reported by the PA.

4.3.

In terms of section 12 of the FSR Act, the SARB must monitor risks and take steps to mitigate risks to financial stability, including advising the PA to take steps to mitigate those risks. The Governor may, in terms of section 14 of the FSR Act, determine systemic events and must notify the PA of such a determination and of an amendment or revocation of such a determination.

4.4.

The Governor may issue a written directive to the PA in terms of section 18 of the FSR Act to provide the SARB with information specified in the directive that the Governor or the SARB needs for the determination of systemic events, that is in the possession of the PA or obtainable by it.

4.5.

If the Governor has in terms of section 14(4) of the FSR Act determined that a systemic event has occurred or is imminent, the Governor may, in writing, direct the PA to assist the SARB with its functions in relation to systemic events by acting in accordance with the directive when exercising its powers. The directive may include directions aimed at supporting the restructuring, curatorship or winding-up of any financial institution; preventing or reducing the spread of risk, weakness or disruption through the financial system or increasing the resilience of the financial institutions to risk, weakness and disruption.

4.6.

To mitigate the risks that systemic events may occur, the SARB may, in terms of section 30 of the FSR Act, and after consulting with the PA, direct the PA to impose, either through prudential standards or regulator’s directives, requirements applicable to one or more specific systemically important financial institutions (SIFI’s) or to such institutions generally in relation to matters provided in section 30 of the FSR Act.

4.7.

In terms of section 34(1) (b) of the FSR Act, the PA must co-operate with and assist the SARB, as required by the FSR Act.

4.8.

The SARB and the PA hereby undertake to promptly and reasonably carry out their statutory duties and obligations as set out above in the following manner:

4.8.1.

The Parties will seek the input of each other on draft documentation that has an impact on the maintenance of financial stability. The classification of what documentation impacts the maintenance of financial stability will be decided between the Parties.

4.8.2.

The SARB hereby undertakes to promptly notify the PA of a systemic event determination or of its amendment or revocation;

4.8.3.

The PA hereby, in terms of section 17(a) of the FSR Act, undertakes to promptly provide the SARB with any information in its possession which may be relevant for the SARB to manage the systemic event or the effects thereof;

4.8.4.

The PA hereby, in terms of section 17(b) of the FSR Act, undertakes to consult with the SARB before exercising any of its powers in a way that may compromise steps taken or proposed to manage the systemic event or its effects.

4.8.5.

The details and structure of the information required in terms of this section will be decided between the SARB and the PA.

4.8.6.

The PA undertakes to promptly obtain the concurrence of the SARB before taking any of the steps specified under section 31(1) of the FSR Act.

4.8.7.

The Governor or the Deputy Governor responsible for financial stability will notify the CEO of the PA in writing of any event or requirements as provided for by the FSR Act.

5. Minimising the duplication of effort and expense

5.1.

The Parties, through the mechanisms outlined in this MoU and in general, will make every effort to minimise the duplication of effort and expense in the performance of their functions, both as between the Parties and also in relation to any obligations they respectively impose on financial institutions.

6. Specific areas of co-operation and collaboration

6.1.

Sections 26 and 76 of the FSR Act provide that the PA and the SARB must co-operate and collaborate when performing their functions in terms of financial sector laws, the NCA, and the FICA and must for this purpose:

6.1.1.

generally assist and support each other in pursuing their objectives in terms of financial sector laws, FICA and the NCA; and

6.1.2.

inform each other about, and share information about, matters of common interest.

6.2.

Without limiting the generality of this MoU, the Parties agree to specifically co-operate and collaborate on the following matters, in the manner set out in Annexure A to H, which form part of this MoU:

6.2.1.

Consistent regulatory strategies (Annexure A);

6.2.2.

Regulations and regulatory instruments (Annexure B);

6.2.3.

Licensing of financial institutions and market infrastructure (Annexure C);

6.2.4.

Supervisory on-site inspections and investigations (Annexure D);

6.2.5.

Enforcement and administrative action (Annexure E);

6.2.6.

Recovery and curatorship (Annexure F);

6.2.7.

Reporting by financial institutions, including statutory reporting and data collection; measures (Annexure G); and

6.2.8.

Information sharing (Annexure H).

6.3.

The Parties agree that, in order to facilitate the implementation and execution of this MoU, additional or supplementary processes and procedures between the Parties may be documented in protocols, which will prescribe detailed practical steps and/or arrangements between the Parties. The protocols will not form part of this MoU.

7. Policies and strategies

7.1.

Each Party will draft strategies and policies in pursuit of their respective objectives.

7.2.

The Parties will consult each other at an early stage in relation to strategy and policy development.

7.3.

The Parties will strive to adopt consistent regulatory strategies, including addressing regulatory and supervisory challenges.

7.4.

The process between the Parties on consistent regulatory strategies is detailed under Annexure “A”.

8. Regulations and Regulatory instruments

8.1.

In terms of section 98(3) read with section 99 of the FSR Act, when the PA is making a regulatory instrument or a regulatory instrument that is materially different from the draft thereof it must comply with section 98(1)(a) of the FSR Act, and must provide a copy of the documents specified therein to Parties mentioned in section 98(3)(a), including the SARB.

8.2.

When the PA is making an urgent regulatory instrument it must comply with section 100(1) and 100(2) of the FSR Act and must within 30 days of making the instrument provide a copy of the documents specified therein to Parties mentioned in section 100(3)(b)(i) including the SARB.

8.3.

In terms of section 105 of the FSR Act the PA may make prudential standards.