The Prudential Authority promotes and enhances the safety and soundness of the financial system by regulating and supervising financial institutions.
The Prudential Authority of the South African Reserve Bank cracked the whip during the previous financial year, starting investigations into 35 deposit-taking schemes and fining 16 companies R134.23 million for not complying with the Financial Intelligence Centre Act (Fica).
The Prudential Authority is responsible for setting the prudential standards and regulations governing the financial sector to ensure the stability and resilience of financial institutions.
The Prudential Authority has the mandate to:
- Promote and enhance the safety and soundness of financial institutions, such as banks and insurers
- Protect financial customers against the risk of institutions failing to meet their obligations
- Support the South African Reserve Bank in maintaining financial stability.
The Prudential Authority initiated investigations into 35 illegal schemes accepting deposits from the public. Four more were added from the previous year. In the previous financial year, the Prudential Authority started with investigations into 187 new schemes not registered as insurers, with 60 added from the previous year, while 127 were completed.
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Fines from the Prudential Authority for Fica non-compliance
The Prudential Authority also conducted 22 investigations at banks, life insurers and branches of foreign banks to check if they comply with anti-money laundering and combating the financing of terrorism requirements.
During its inspections, the Prudential Authority found that 16 companies did not comply with the Fica and imposed administrative fines of R134.23 million. R29 million of this amount was provisionally suspended.
According to the report, Capitec received the highest administrative fine of R56.25 million, with R10.5 million suspended, as well as seven warnings and a reprimand for non-compliance such as failing to adequately conduct customer due diligence, enhanced due diligence and ongoing due diligence, ensure timely cash threshold reporting, not reporting suspicious transactions and suspicious activity.
Old Mutual Life Assurance Company was fined R15.9 million for similar offences, with R5.9 million provisionally suspended. The Prudential Authority also fined Standard Bank R13 million, while Escap SOC was fined R7.6 million for non-compliance with the Insurance Act and other industry standards, as well as standards for corporate management.
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Extent of Prudential Authority’s supervision
According to the report, the Prudential Authority supervised 27 banks, including 16 banks registered in South Africa. The assets of these banks were R8 231.2 billion, 6% more than a year ago. These banks supplied loans and credit to the value of R5 873, 5% than a year before and wrote off loans to the value of R308 billion, 3% more than a year ago.
The banks were also more profitable, with the average return of earnings reaching 15.8% compared to 14.8% the year before.
The three mutual banks in the country had assets to the value of R4.1 billion, 11% more than a year ago, while they supplied loans and credit that were 5% higher than a year ago at R3.2 billion. These banks only started showing a profit since February 2023 after a long period of losses, with an average return of earnings increasing from 2% in the previous year to 3.8%. Loans in arrears amounted to R400 million.
The Prudential Authority also supervised 155 insurers with assets of more than R4 960 billion, of which most belonged to life insurers. Insurers paid out claims to the value of R625.7 billion, almost 9% more than the year before. The Authority also supervises the Road Accident Fund and Lloyds.
