BANKS ACT: DRAFT DIRECTIVE PROPOSES MINIMUM CAPITAL BUFFER REQUIREMENT

BANKS ACT: DRAFT DIRECTIVE PROPOSES MINIMUM CAPITAL BUFFER REQUIREMENT

• 27 November 2023
• Financial Sector
• SA Legal Academy

The Prudential Authority has called for input by 8 December 2023 on a draft directive proposing that banks should be required to ‘maintain a positive cycle-neutral countercyclical capital buffer of 1%’ from 1 January 2026. A 12-month implementation lead time is proposed, beginning on 1 January 2025.

The rationale behind this move is unpacked in an annexure to the draft directive. This is noting that:

• the South African Reserve Bank requires that banks maintain a positive cycle-neutral countercyclical capital buffer ‘to serve as a macroprudential tool that can be released in the event of sudden shocks, including those unrelated to the credit cycle’
• the Basel Committee on Banking Supervision has ‘observed that banks may be more willing to utilise their buffers when they are released by regulatory authorities’, and
• the minimum requirement is expected to ensure that ‘capital relief can be provided whilst compliance with the minimum capital standards is maintained’.

Please click the links below for more information:

• draft directive
• annexure

Published by SA Legal Academy Policy Watch

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