The  Standing  Committee   on  Finance,  Financial  Sector  Regulation  Bill,  B34  of  2015

Nomonde  Nyembe,  AttorneyAyabonga  Nase,  Candidate  Attorney

Content  of  PresentationCentre  for  

Applied  Legal  Studies

Supporting  Documentation

Purpose  of  the  presentation

Sources  of  HRtsobligation

JohannesburgPrinciples

Suggested  changes  to  language

Centre  for  Applied  Legal  Studies

Basic  Services,  Business  and  Human  Rights,  Environmental  Justice,  Gender,  and  Rule  of  Law

Research

AdvocacyStrategic  Litigation

Supporting  documentation

• Johannesburg  Principles  dated  November  2011

• CALS’  Submission  to  the  National  Treasury  on  the  Draft  Bill  dated  March  2015

• Equator  Principles

Purpose  of  the  presentation  (1)

• Financial  Institutions  have  rights  and  obligations  in  respect  of  the  human  rights  of  others

• Financial  Institutions’  responsibilities:  – respect  (negative  obligation  i.e.  don’t  violate  HRts)– promote  and  fulfil  (positive  obligation  i.e.  actually  realise HRts)

– protect  (positive  obligation  i.e.  not  let  other  people  violate  HRts)

Purpose  of  the  presentation  (2)

• Why  should  FIs  advance  HRt principles?– Reasons  for  FIs

• non-­‐compliance  with  HRts is  financially  highly  risky• failure  to  comply  puts  FIs  at  risk  liability

– Reasons  for  the  state• FIs  can  impede  the  state’s  attempt  to  realise human  rights

– Reasons  for  everyone  else• Provide  the  finance  for  banks• Experience  the  adverse  human  rights  impact

Sources  for  HRts obligations  of  FIs  (1)

• International   Instruments  (voluntary)– Equator  Principles– UN  Guiding  Principles  – UNPRI

• Regional  Instruments  – Protocol  of  the  

Amendment   to  the  Statute  of  the  African  Court  of  Justice

– Resolution  on  Illicit  Capital  Flight

Sources  for  HRts obligations  of  FIs  (2)

• Reparation  for  Apartheid  (TRC  Comments)• Constitution• Companies  Act• Regulation  28  of  the  Pension  Fund  Regulations• Investment  Act• Mineral  and  Petroleum  Resources  Development  Act

Johannesburg  Principles• Prepared  by  HR  practitioners   in  banks  and  academia   in  

2011• Provide  for  practices  that  can  be  incorporated  into  

bank  protocol  to  prevent  human  rights  violations:– Pre-­‐contractual  assessment

• Due  Diligence• Contract  preparation• Community  engagement

– During  the  progression  of  the  contract• Oversight  (e.g.  staggared lending)

– Post-­‐contractual• Liability• Grievance  mechanism

Amendments  to  Preamble“To  establish  a  system  of  financial  regulation  by  establishing  the  Prudential  Authority  and  the  Financial  Sector  Conduct  Authority,  and  conferring  powers  on  these  entities;  to  align  the  Financial  Sector  with  the  Constitution;  to  preserve   and  enhance  financial  stability  in  the  Republic  by  conferring  powers  on  the  Reserve   Bank;  to  establish  the  Financial  Stability  Oversight  Committee;  to  regulate  and  supervise   financial  product  providers  and  financial  services  providers;  to  improve  market  conduct  in  order  to  protect  financial  customers;  to  provide  for  co-­‐ordination,  co-­‐operation,  collaboration  and  consultation  among  the  Reserve   Bank,  the  Prudential  Authority,  the  Financial  Sector  Conduct  Authority,  the  National  Credit  Regulator  and  other  organs  of  state  in  relation  to  financial  stability  and  the  functions  of  these  entities;  to  establish  the  Financial  System  Council  of  Regulators  and  the  Financial  Sector  Inter-­‐Ministerial  Council;  to  provide  for  making  regulatory  instruments,  including  prudential  standards,  conduct  standards  and  joint  standards;  to  make  provision  for  the  licensing  of  financial  institutions;  to  make  comprehensive  provision  for  powers  to  gather  information  and  to  conduct  supervisory  on-­‐site  inspections  and  investigations…”

Objective  and  Administration  of  Act  (s7)

The  object  of  this  Act  is  to  achieve  a  stable  financial  system  that  works  in  the  interests  of  financial  customers  and  that  supports  balanced  and  sustainable  economic  growth  in  the  Republic,  by  establishing,   in  conjunction  with  the  specific  financial  sector  laws,  a  regulatory  and  supervisory   framework   that  promotes—(a)   constitutionalism  and  compliance  with  the  Bill  of  Rights  as  provided  for  in  the  Constitution;(b) financial  stability;  (c)   the  safety  and  soundness  of  financial   institutions;  (d)   the  fair  treatment  and  protection  of  financial  customers;  (e)   the  efficiency  and  integrity  of  the  financial  system;  (f)   the  prevention  of  financial  crime;  (g)    financial   inclusion;  and  (h)  confidence  in  the  financial  system.  

Suggested  new  clause  in  Chapter  7

“Financial  Institutions  must  comply  with  the  Constitution  and  the  rights  set  out  in  the  Bill  of  Rights  in  all  regulated  activities.”

Establishment  of  FSO  Comm (s20)(1)  A  committee  called  the  Financial  Stability  Oversight  Committee   is  hereby  established.  (2)  The  primary  objectives  of  the  Financial  Stability  Oversight  Committee  are  to—(a)   support  the  Reserve  Bank  when  the  Reserve  Bank  performs  its  functions  in  relation  to  financial  stability;(b)   facilitate   co-­‐operation  and  collaboration   between,  and  co-­‐ordination  of  action  among,  the  financial  sector  regulators  and  the  Reserve  Bank  in  respect  of  matters  relating  to  financial  stability;  and(c)  Ensure  compliance  with  the  Constitution  and  Bill  of  Rights

Monitoring  by  the  Reserve  Bank  (s12)The  Reserve  Bank  must—(a)  monitor  and  keep  under  review—

(i)  the  strengths  and  weaknesses  of  the  financial  system;  and(ii)  any  risks  to  financial  stability   including  human  rights  violations,  and  the  nature  and  extent  of  those  risks,  including  risks  that  systemic  events  will  occur  and  any  other  risks  contemplated  in  matters  raised  by  members  of  the  Financial  Stability  Oversight  Committee   or  reported  to  the  Reserve  Bank  by  a  financial  sector  regulator;  

(b)   take  steps  to  mitigate  risks  to  financial  stability  and  constitutional  non-­‐compliance,  including  advising  the  financial  sector  regulators,  and  any  other  organ  of  state,  of  the  steps  to  take  to  mitigate  those  risks;  (c)   regularly  assess   the  observance  of  principles  in  the  Republic  developed  by  international  standard  setting  bodies  for  market  infrastructures,  and  report  its  findings  to  the  financial  sector  regulators  and  the  Minister,  having  regard  to  the  circumstances  and  the  context  within  the  Republic;  and  (d)  Assess  complaints  made  to  it  concerning  human  rights  violations  directly  from  members  of  the  public  or  affected  communities.”

Contact  Details

• Nomonde  Nyembe– Email:  Nomonde.Nyembe@wits.ac.za– Telephone:  0117178606

• Ayabonga  Nase– Email:  Ayabonga.Nase@wits.ac.za– Telephone:  0117178616

• Website:  http://www.wits.ac.za/law/cals