The Banking Association SA (Basa) has expressed concern that the proposal by the EFF to create a state-owned bank could engender systemic risk for the banking sector if such a bank were to capture the accounts of public servants.
Another danger flagged by the association in a presentation during public hearings on the bill by parliament's finance committee on Tuesday was that of political interference in the bank.
EFF chief whip Floyd Shivambu has tabled a private member's bill to amend the Banks Act to allow for the establishment of a state-owned bank. Currently the act only permits public companies to own banks and does not explicitly permit the state to own banks.
He said that an example of a state-owned bank could be a public service bank which could provide banking services to public servants across all spheres of government. Another example would be the Post Bank.
In a written presentation to the committee Basa said it supported the creation of all new banks provided they were subject to the same regulatory supervision as other banks to ensure there was a level playing field.
However it noted that "the impact on commercial banks in terms of their risk profile and target market needs to be considered as this may change going forward once the impact of a state-owned or operated bank on the banking industry starts to take effect.
"Consideration should be given to the potential for systemic risk on the current banking industry should such a bank come into being‚ especially if there is large-scale movement of public sector staff away from the current banks to such a bank."
Public sector employees‚ Basa said‚ represented a large component of banking clients.
Basa said safeguards would have to be put in place to prevent the state imposing laws or regulations that compelled other state institutions - including provincial and local government - to only hold accounts with the state-owned bank.
"Currently all commercial banks compete via tender to operate banking facilities for various arms of government and this forms a substantial portion of business for such banks."
Basa representative Nobambo Mlandu in her oral presentation to the committee also raised the concern of the potential additional burden on the fiscus in relation to the initial and ongoing funding and licence obligations of a state-owned bank. There was also the possibility of political influence and interference which could result in moral hazard.
Finance minister Nhlanhla Nene said in a letter to the finance committee that cabinet had approved the Financial Matters Amendment Bill which provided for state-owned banks on condition that they were solvent and that they have government approval. These requirements were proposed to limit the fiscal risks of state-owned banks.
In a verbal presentation treasury chief director of financial stability and markets Roy Havemann pointed out that there were heightened risks for depositors’ money in a state bank because of the generally bad repayment culture (eg Eskom); problems with asset quality (Ithala Bank); and the fact that such banks often lent to single markets (eg Land Bank) which made their business model more risky.
Reserve Bank head of policy‚ statistics and industry support‚ Unathi Kamlana‚ insisted that a state-owned bank would have to be subject to exactly the same laws and regulations as commercial banks. Only state-owned companies with a solid track record of fiscal rectitude‚ solvency and financial sustainability should be allowed to create a state-owned bank.
Cosatu parliamentary co-ordinator Matthew Parks said the federation supported the proposal for the creation of "progressive" state-owned banks that would cater for workers and the poor.