Unlock the complexities of banking law with these well-organised notes. Includes clear explanations, practical examples (case law), external resources (articles) and a focus on critical learning outcomes make it the ultimate study companion to excel in your understanding of banking law.
ROLE OF BANKS IN COMMERCE
• The traditional role of banks has been net of a loan intermediary, the bringing
together of borrowers and lenders.
• Banks can only perform their traditional role of loan intermediary successfully
and for a sustained period with proper management of credit, liquidity, and
interest rates.
→ If banks carelessly and inappropriately lend money to borrowers who fail to
repay, this will result in them suddenly stopping or reducing lending activities.
→ “Credit squeeze”: It becomes extremely difficult for potential borrowers to
borrow money and for other lending activities to occur.
INVESTORS
PUBLIC BANKING
Regulates banking
institutions and
ensures their solvency.
PRIVATE BANKING
BANKS
Provides legal certainty
regarding rights and
obligations arising from
individual transactions.
BORROWERS
SOUTH AFRICAN BANKING SECTOR
• It is generally accepted that SA has a sound and stable banking environment.
• Central banks: Conceived as autonomous institutions that have exclusive
jurisdiction over affairs within their competence and operate at the apex of a
country’s monetary and banking structure.
• The Reserve Bank is the central bank of SA and it is governed by the SA Reserve
Bank Act.
→ The RB acts as a regulator of banks and banking businesses – more
specifically, it’s the duty the of Office of Registrar of Banks to regulate banks
and banking businesses.
→ S3 of the Banks Act: For the registration of institutions as deposit-taking
institutions and other purposes there shall, as part of the RB, be an office
called the Office for Deposit-taking Institutions, and at the head of such office
shall be the Registrar of Deposit-taking Institutions.
AIM OF BANKING SECTOR SUPERVISION AND LEGISLATION
1) To ensure prudent financial management by banks.
2) To introduce a variety of measures to protect all consumers, but particularly less
sophisticated consumers.
3) To increase the provision of banking services to that segment of consumers who
are known as ‘unbanked’.
, TYPES OF BANKS
COMMERCIAL BANKS • Regulated by the Banks Act.
(1st tier) • A.K.A retail banks: A financial institution that provides
banking services, offers payment intermediary services,
plays a role as depositories/lenders of funds, and
provides access to banking systems.
• Examples: FNB, Nedbank, Standard Bank and ABSA
Bank.
INVESTMENT BANKS • A financial institution that assists individuals, companies,
(1st tier) and governments in raising capital by underwriting and
or acting as the client's agent in the issuance of security.
• They DON’T take deposits.
• 2 services:
1) Trade/promote/sell securities for cash or other
securities.
2) Advise on the management of assets.
LAND & • Regulated by the Land and Agricultural Development
AGRICULTURAL Bank Act.
DEVELOPMENT • Promotes and finances development in the agricultural
BANK OF SA sector of the economy.
(1st tier)
DEVELOPMENT • Regulated by the Development Bank of Southern Africa
BANK OF SA Act.
(1st tier) • Focuses on large infrastructure projects within both the
public and private sectors.
• Promotes economic development and growth, human
resource development, institutional capacity building and
the support of development projects in the region.
MUTUAL BANKS • Regulated by the Mutual Banks Act.
(2nd tier) • A juristic person registered as a mutual bank and whose
members qualify as such by being shareholders and being
entitled to participate in exercising control in a general
meeting of the bank.
• Must have at least 7 members who have subscribed their
names to the proposed articles of association agreed to
buy them for the government of the bank.
• Requires the maintenance of unimpaired reserved funds
of at least R10 million or up to 8% of its risk exposure.
• May accept deposits and ground flows, advances, or other
credits on a national level.
POSTBANK OF SA • Regulated by the South African Post Bank Limited Act.
(2nd tier) • A legal person to conduct the business of a bank that will
encourage and attract savings from among the people.
COOPERATIVE • Regulated by the Co-operative Banks Act.
BANKS • Part of the government's broader strategy for promoting
(2nd tier) access to financial services in addition to financial sector
charter and the Mzansi initiative.
• Its members are of a similar profession or are employed
by a common employer, are employed within the same
, business district, have common membership in an
association or organisation, or reside within the same
defined community or geographical area.
• Requirements for registration:
1) It must be of the type of bank to which the application
applies.
2) It must have sufficient human and financial capacity.
3) The directors and executive officers of the Bank must
be experienced, knowledgeable fit and proper.
• Takes deposits; has 200 or more members and holds
deposits of members to the value of R1 million or more.
VILLAGE BANKS • Organised and owned by its members.
(3rd tier) • Provide appropriate financial services at a local level and
provide a link to a first-tier bank.
• Encourages its members to save.
• Benefits:
1) The return associated with their shares.
2) The usual benefits of investing in savings.
DEDICATED BANKS • Could be regulated by the Dedicated Banks Bill.
(3rd tier) • It is expected to maintain a minimum capital such that
the sum of its primary and secondary capital and
unimpaired reserves don't at any time exceed an amount
prescribed by regulation.
• It is a public company registered as a dedicated bank ito
the bill and any reference shall be construed as a generic
reference to both savings and loan banks.
STOKVELS • A generic name for a wide range of credit and savings
(3rd tier) associations that one encounters in disadvantaged
communities.
• It is excluded from the ambit of the Banks Act.
MOBILE BANKING • Customers who make use of this payment service don't
SERVICE require a conventional bank account.
(3rd tier) • This product is offered to clients at a fraction of the cost
of a conventional banking payment.
• There is no specific statute which deals exclusively with
mobile banking services.
THE BANKS ACT
DEFINITION OF A BANK
• Banks are public companies incorporated under the Companies Act and
registered under the Banks Act, which partake in deposits from the public.
• The concept of a ‘bank’ has not been defined comprehensively in South African
banking legislation (BA).
• BEA: Any body of persons, whether incorporated or not, that carries on the
business of banking.
DEFINITION OF THE BUSINESS OF A BANK
1) Where someone accepts deposits from the general public as a regular feature of
business.
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