Banking Licencing in South Africa involves the following;
Pre-application consultation
Information to be submitted with an application
Submission of application
Processing and notification
What is the ‘business of a bank?’
The ‘business of a bank’, as defined in the Banks Act, includes the soliciting or advertising for, or the acceptance of, deposits from the general public as a regular feature of an institution’s business.
A deposit is defined as an amount of money paid by one person or institution to another, subject to an agreement in terms of which an equal amount or any part thereof will be repaid on demand, on a specified or unspecified date, or in circumstances agreed upon between the parties involved.
In order to conduct the business of a bank in the Republic, an entity must be registered as a bank, by the PA. Furthermore, conducting the business of a bank in the Republic without being licensed as a bank is an offence.
What is a commercial bank?
A (commercial) bank is defined as a public company registered as a bank in terms of the Banks Act and
owned by its shareholders who are not necessarily depositors/customers of the bank.
The legislation applicable to banks can be obtained from the PA’s website via the following link:
http://www.resbank.co.za/PrudentialAuthority/Deposittakers/Banks/Regulatory%20instruments/Pages/default.aspx
What are the alternatives?
Depending on an applicant’s business plan or the activities the applicant wants to undertake, setting up a bank may not be the only, or in some cases, the most appropriate option. There are a number of alternatives to becoming a commercial bank, which allows an applicant to provide some of the services that banks offer at a potentially lower cost than setting up a bank. Alternatives to consider include a mutual bank, cooperative bank or cooperative financial institution.
A mutual bank is defined as a juristic person owned by its depositors who qualify as members by virtue of their being shareholders in that juristic person, and who are entitled to participate in the exercise of
control in a general meeting of that mutual bank. The legislation applicable to mutual banks can be obtained from the PA’s website via the following link:
A cooperative bank is defined as an autonomous association of persons united voluntarily to meet their common economic and social needs and aspirations through a jointly owned and democratically
controlled enterprise organised and operated on cooperative principles, whose members:
are employed by a common employer or who are employed within the same business district; or have common membership in an association or organisation, including a religious, social, cooperative, labour or educational group; or
reside within the same defined community or geographical area.
The legislation applicable to cooperative banks can be obtained from the PA’s website via the following
link: http://www.resbank.co.za/PrudentialAuthority/Deposit-takers/Co-operativeBanks/Regulatory%20instruments/Pages/default.aspx
A cooperative financial institution is defined as a cooperative that takes deposits and usually identifies itself as a Financial Cooperative, Financial Services Cooperative, Credit Union or Savings and Credit
Cooperative.
The legislation applicable to cooperative financial institutions can be obtained from the PA’s website via
the following link: http://www.resbank.co.za/PrudentialAuthority/Deposit-takers/Co-operativeFinancialInstitutions/Regulatory%20instruments/Pages/default.aspx
There are varying degrees of legal restrictions placed on the scope and/or size of some of these alternative options, which are matched by differing levels of regulation.