On the 28th of February 2022, the FSCA published its draft strategy for promoting the transformation of the financial sector and invited comments from interested parties. A total of 26 stakeholders, including Masthead, had provided comments.
On 30 March 2023, the FSCA addressed the comments received from stakeholders in the form of a “Summary of Feedback received on the Draft FSCA Strategy for promoting financial sector transformation”. Overall, the comments showed support for the FSCA’s strategic objectives, whilst the questions and concerns raised related to the approach that the FSCA intended to use to implement those objectives.
The background to the FSCA transformation strategy is aimed at promoting transformation within the financial sector in South Africa. The aim of this strategy is to increase the role of historically disadvantaged individuals and marginalized groups, in leadership positions and decision-making by addressing past inequalities and expressing support for diversity and inclusion.
The goal is to create a financial sector that is representative of the South African population and promotes equal opportunities for all individuals, regardless of their race, gender, or background. By promoting diversity and inclusion within the financial sector, the FSCA aims to create a more resilient and sustainable financial system that can support the economic growth and development of the country.
Some of the initiatives of the transformation strategy include the implementation of diversity and inclusion policies, the development of mentorship and leadership programs, the promotion of skills development and training opportunities, and the establishment of partnerships with organisations that promote diversity and inclusion. This strategic priority has been further elaborated in the FSCA 2021 – 2025 Regulatory Strategy.
The legislative framework for transformation The Conduct of Financial Institutions Bill (COFI), is still under development and the FSCA will therefore use a two-phase approach to promote transformation:
- Phase 1 will focus on the role that the FSCA will play within the current legislative framework; and
- Phase 2 will focus on the role that the FSCA will play within the COFI legislative framework.
The stakeholder comments that were received and considered by the FSCA it resulted in key changes and additional detail being provided, which included-
- Providing additional clarity on the legislative frameworks that guided the development of the strategy as noted above.
- The FSCA reconsidered its initial proposal to implement a minimum B-BBEE Level 4 requirement in line with implementing a proportionate approach to transformation and avoiding the limitations of a “one size fits all” approach. Removing the Level 4 requirement also allows the FSCA to better implement a risk-based approach, focusing resources where there is the greatest need for transformation efforts.
- Providing clarity on how the FSCA intends to ensure that the application of the strategy will remain proportional; and
- Providing clarity on the impact of transformation requirements on new institutions entering the market and for existing licensed institutions.
When the COFI Act is implemented, there will be more interaction between the FSCA and industry. An annual Implementation Plan will be created to track and monitor the FSCA’s transformational activities. This would involve undertakings for the implementation of rules pertaining to the restructuring of the financial sector. The Implementation Plan will be updated yearly to make sure it stays current and can adequately account for changes in the industry and the legal environment.