Liberalisation, Regulation and Provision: The Implications of Compliance with International Norms for the South African Financial Sector

The South African financial sector, described here as the banking, insurance and securities industries, is a sophisticated enclave within widespread financial exclusion. The financial sector is generally regarded as stable and well regulated; indeed it is to the latter that the robustness of the sector has been attributed, in the wake of the Asian and other financial crises.

In recent years the sector has been opening up with greater participation from foreign and niche-seeking domestic firms. There has also been considerable transformation of the regulatory requirements of the sector, demanding greater compliance in terms of corporate governance and transparency. The regulations have also lead to greater equity in terms of regulatory treatment between and within the industries. However, while the recent promulgation of regulatory legislation in each of the industries has resulted in greater compliance with international standards, the adjustment required to meet worldclass standards is not yet over. In addition, meeting international standards for compliance and regulation is only one part of the dual pressure facing the sector: the other lies in the growing political and economic imperative to address widespread financial under-provision in South Africa. The report examines the implications of compliance with international trends for greater openness and tighter regulation, within the context of domestic pressures to extend financial services to the majority of South Africans.

The paper begins by sketching the background to the sector, providing a brief overview and highlighting some of the reasons for the importance of the sector.