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.