The Conduct Standard for Banks published on 3 July 2020 is a forerunner for the conduct related principles to be championed by Conduct of Financial Institutions Bill (“COFI Bill”) when enacted. Although the COFI Bill was distributed for public comment in early 2019, the long awaited second draft has not yet been published. The principles of the COFI Bill however are getting a first airing through their application to the conduct of banks in terms of the Conduct Standard.
The issuance of the Conduct Standard under the Financial Sector Regulation Act, 2017 (“FSRA”) is in line with the FSCA's policy imperative to regulate the conduct of banks in South Africa and ensure that customers of banks are treated fairly. We have unpacked the FSCA's TCF outcomes in relation to banks further here.
Prior to the promulgation of the FSRA, the FSCA (and its predecessor the FSB) had limited oversight of the conduct of the banking sector as the Financial Advisory and Intermediary Services Act, 2002 applied only to advisory and intermediary services provided by banks in their capacities as financial services providers. The National Credit Regulator supervised (and will continue to supervise) the conduct of banks as credit providers. Now, in terms of the FSRA, the FSCA has jurisdiction over the conduct of banks and will supervise their conduct in accordance with the FSRA, the Conduct Standard and, once enacted, the COFI Bill.
As banks continue to be regulated by all existing financial sector laws applicable to them, the Conduct Standard seeks to avoid inconsistencies and redundancies with existing requirements and rather overlays the new conduct principles in a similar way to the way that the FSRA overlaid the twin peaks architecture over existing financial sector laws.
While the Conduct Standard is based on the TCF outcomes adopted nearly 10 years ago, in our view it raises some interesting new considerations for the banking industry. Financial institutions in general would be advised to take advantage of the planning opportunity presented by the Conduct Standard and engage with how these principles will affect their business going forward. This will also ensure business readiness for the COFI Bill.
We will be unpacking the provisions of the Conduct Standard in greater detail at an upcoming webinar on TUE 21 JUL 2020 at 11am and will be exploring the impact on
- Advertising
- Liability for distribution networks
- Product design
- Customer complaints
- The termination or switching of financial products
Originally published 14 July, 2020
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