Standing Committee on Finance: Comments on
Description: Standing Committee on Finance: Comments on Financial Sector Laws Amendment Bill B15 2020 Odie Strydom 18 May 2021 Introduction Thank you for the opportunity Competition law and policy economist with 20 years experience (M Phil in
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slide1. Standing Committee on Finance:
Comments on Financial Sector Laws Amendment Bill [B15 – 2020]
Odie Strydom
18 May 2021<br>
slide2. Introduction
Thank you for the opportunity
Competition law and policy economist with 20 years experience (M Phil in Futures Studies, B Comm Honours Economics)
Betweenity was established in 2020 and specialises in African competition law and policy foresight
Betweenity controls the Betweenity App – an Africa competition law and policy news App providing users with daily updates in the field
To accelerate coherent, collaborative and inclusive African economic growth across the Continent
Introduces proactive (as opposed to reactive) regulation 2<br>
slide3. Focus of comments:
Section 19 of Bill dealing with amendment to section 18 of the Competition Act, 1998 (Act) 3<br>
slide4. Section 18 of Act deals with instances where the competition authorities’ right to review mergers are “ousted”:
by the Minister of Finance, where merger approval is required in terms of the:
Banks Act; or
Financial Markets Act.
now also: by the Reserve Bank Governor, where the merger takes place in terms of section 166S of the Financial Sector Regulation Act, 2017 4<br>
slide5. Proposal:
To provide competition authorities with the opportunity to review the merger within six months, and to impose conditions (if required) 5<br>
slide6. Proposal – to add wording to the effect:
“Within six months after a merger has been implemented in accordance with section 166S of the Financial Sector Regulation Act, 2017, the Competition Commission shall commence with an investigation into the merger in accordance with section 12A of the Competition Act.
Any conditions shall be imposed in consultation with the Governor of the Reserve Bank”. 6<br>
slide7. Arguments 7<br>
slide8. Brand value and client base may remain fairly well in tact
Much effort is being expended to untie massive knots in African financial markets
Financial markets are subject to digital disruption
Evidence of banks having exploited consumer-centric regulation under Covid-19
Critical public interest issues may arise, which can be addressed via conditions
In line with current approaches 8<br>
slide9. 1. Brand value and client base may remain fairly well in tact:
Especially:
if the regulatory process is well managed (which is the objective of the Bill); and
if the critical mass of competitor is added to existing capacity
So, the merger may indeed significantly lessen competition and reduce consumer welfare 9<br>
slide10. 2. Much effort is being expended to untie massive knots in African financial markets
Financial markets are complicated
They are a gateway to structural transformation across the Continent
Recent efforts across Africa
Southern Africa
East & Central Africa
North Africa
West Africa 10<br>
slide11. Southern Africa
South Africa: Introduction of Conduct of Financial Institutions Bill aiming to protect financial customers against financial institutions (after a Code of Conduct has failed)
Angola: Competition Regulatory Authority made recommendations to government on regulation and operationalisation of the electronic payment system
Zambia: Publication of Prohibition against Unwarranted Charges and Fees / Regulations of Specific Charges
Namibia: The publication of bank fees comparisons / Regulations relating to Unfair Terms in Transactions or Contracts between Banking Institutions and Customers / Determination on the Disclosure of Bank Charges 11<br>
slide12. East / Central Africa
Ethiopia: Due to World Bank pressure, new entrants are now also allowed to provide mobile money services in competition with the incumbent, Ethio Telecom, in the interest of fair competition
Rwanda: Financial Consumer Protection Laws have come into effect; and lately – outcry among users re banking costs being considered “prohibitive” and “unjustifiably expensive”
Uganda: The publication of banking fees comparisons in an effort to improve transparency 12<br>
slide13. North Africa
Morocco: Investigation into collusion between banks and insurance companies
Libya: Central Bank published report calling for the development of laws enhancing competition between banks
Egypt: New banking law containing provisions on fair competition and making provision for the regulation of latest technological developments in banking sector such a e-payments, fintech businesses, cryptocurrencies
Tunisia: Investigation into collusion post exploitation during pandemic 13<br>
slide14. West Africa
Nigeria: Consumer protection investigations into banks / Combined attempt by two sets of Regulators (banking and telecoms) to open up digital financial services to consumers
West African Economic and Monetary Community: Central Bank prioritised financial inclusion and competition
Senegal: Government: requested by consumer associations to force banks to standardise price lists
Benin: Decree promulgated establishing Financial Services Regulator responsible for the regulation of competition in the financial services market and the relationships between financial institutions, consumers and SMEs 14<br>
slide15. 3. Financial markets are subject to digital disruption
In digital, the issue of critical mass is crucial – first-mover advantage may leave others behind
Combined with network effects (mobile money)
Lack of regulatory oversight might lead to quick and large-scale consolidation
“Tipping” 15<br>
slide16. 4. Evidence of banks having exploited regulations during Covid-19
Tunisia – Even where the spirit of regulations have been clear
Government imposed measures for banks to postpone loan repayments to mitigate Covid-19 effects on consumers
But banks colluded
passed on loan repayment costs to customers;
Charged additional interest
Imposed penalties for late payments
Imposed fees for the extended maturity of loans. 16<br>
slide17. The banks motivated the violation with reference to:
the absence of a legal and regulatory framework governing the operation of a postponement of loans, and the repayment of such postponed loans; and
the non-existence of a decision by the Ministry of Finance.
Much room for exploitation when customers are in distress
Consider the complete event and implications 17<br>
slide18. 5. Conditions may serve to mitigate public interest effects
E.g. employment conditions
not only those preventing retrenchments, but those aimed at re-employment, e.g.:
requiring the merged entity to re-employ workers where vacancies arise
Empowerment conditions
Conditions speaking to regulatory safeguarding
Monitoring conditions regarding performance 18<br>
slide19. 6. In line with current approaches:
In line with current provisions of the Act making provision for:
the Commission having the ability to require the notification of “small” mergers for six months after the merger has taken place (see section 13(3) of the Act)
conditions to be imposed in relation to such mergers, e.g. divestitures (see section 13(5)(b)(ii) of the Act)
In line with dual emphasis on competition and public interest
In line with the Commission’s policy approach emphasising complexity – acting on the temporal dimension
Increased emphasis by competition authorities for “rapid market repair” – limit the time of potential harm to a minimum 19<br>
slide20. To summarise:
To provide competition authorities with the opportunity to review the merger within six months, and to impose conditions (if required) 20<br>
slide21. Any questions? 21<br>
slide22. Thank you! Ms Odie Strydom
Cell: 0833 819 419
odie@betweenity.africa
www.betweenity.africa 22<br>
Comments on Financial Sector Laws Amendment Bill [B15 – 2020]
Odie Strydom
18 May 2021<br>
slide2. Introduction
Thank you for the opportunity
Competition law and policy economist with 20 years experience (M Phil in Futures Studies, B Comm Honours Economics)
Betweenity was established in 2020 and specialises in African competition law and policy foresight
Betweenity controls the Betweenity App – an Africa competition law and policy news App providing users with daily updates in the field
To accelerate coherent, collaborative and inclusive African economic growth across the Continent
Introduces proactive (as opposed to reactive) regulation 2<br>
slide3. Focus of comments:
Section 19 of Bill dealing with amendment to section 18 of the Competition Act, 1998 (Act) 3<br>
slide4. Section 18 of Act deals with instances where the competition authorities’ right to review mergers are “ousted”:
by the Minister of Finance, where merger approval is required in terms of the:
Banks Act; or
Financial Markets Act.
now also: by the Reserve Bank Governor, where the merger takes place in terms of section 166S of the Financial Sector Regulation Act, 2017 4<br>
slide5. Proposal:
To provide competition authorities with the opportunity to review the merger within six months, and to impose conditions (if required) 5<br>
slide6. Proposal – to add wording to the effect:
“Within six months after a merger has been implemented in accordance with section 166S of the Financial Sector Regulation Act, 2017, the Competition Commission shall commence with an investigation into the merger in accordance with section 12A of the Competition Act.
Any conditions shall be imposed in consultation with the Governor of the Reserve Bank”. 6<br>
slide7. Arguments 7<br>
slide8. Brand value and client base may remain fairly well in tact
Much effort is being expended to untie massive knots in African financial markets
Financial markets are subject to digital disruption
Evidence of banks having exploited consumer-centric regulation under Covid-19
Critical public interest issues may arise, which can be addressed via conditions
In line with current approaches 8<br>
slide9. 1. Brand value and client base may remain fairly well in tact:
Especially:
if the regulatory process is well managed (which is the objective of the Bill); and
if the critical mass of competitor is added to existing capacity
So, the merger may indeed significantly lessen competition and reduce consumer welfare 9<br>
slide10. 2. Much effort is being expended to untie massive knots in African financial markets
Financial markets are complicated
They are a gateway to structural transformation across the Continent
Recent efforts across Africa
Southern Africa
East & Central Africa
North Africa
West Africa 10<br>
slide11. Southern Africa
South Africa: Introduction of Conduct of Financial Institutions Bill aiming to protect financial customers against financial institutions (after a Code of Conduct has failed)
Angola: Competition Regulatory Authority made recommendations to government on regulation and operationalisation of the electronic payment system
Zambia: Publication of Prohibition against Unwarranted Charges and Fees / Regulations of Specific Charges
Namibia: The publication of bank fees comparisons / Regulations relating to Unfair Terms in Transactions or Contracts between Banking Institutions and Customers / Determination on the Disclosure of Bank Charges 11<br>
slide12. East / Central Africa
Ethiopia: Due to World Bank pressure, new entrants are now also allowed to provide mobile money services in competition with the incumbent, Ethio Telecom, in the interest of fair competition
Rwanda: Financial Consumer Protection Laws have come into effect; and lately – outcry among users re banking costs being considered “prohibitive” and “unjustifiably expensive”
Uganda: The publication of banking fees comparisons in an effort to improve transparency 12<br>
slide13. North Africa
Morocco: Investigation into collusion between banks and insurance companies
Libya: Central Bank published report calling for the development of laws enhancing competition between banks
Egypt: New banking law containing provisions on fair competition and making provision for the regulation of latest technological developments in banking sector such a e-payments, fintech businesses, cryptocurrencies
Tunisia: Investigation into collusion post exploitation during pandemic 13<br>
slide14. West Africa
Nigeria: Consumer protection investigations into banks / Combined attempt by two sets of Regulators (banking and telecoms) to open up digital financial services to consumers
West African Economic and Monetary Community: Central Bank prioritised financial inclusion and competition
Senegal: Government: requested by consumer associations to force banks to standardise price lists
Benin: Decree promulgated establishing Financial Services Regulator responsible for the regulation of competition in the financial services market and the relationships between financial institutions, consumers and SMEs 14<br>
slide15. 3. Financial markets are subject to digital disruption
In digital, the issue of critical mass is crucial – first-mover advantage may leave others behind
Combined with network effects (mobile money)
Lack of regulatory oversight might lead to quick and large-scale consolidation
“Tipping” 15<br>
slide16. 4. Evidence of banks having exploited regulations during Covid-19
Tunisia – Even where the spirit of regulations have been clear
Government imposed measures for banks to postpone loan repayments to mitigate Covid-19 effects on consumers
But banks colluded
passed on loan repayment costs to customers;
Charged additional interest
Imposed penalties for late payments
Imposed fees for the extended maturity of loans. 16<br>
slide17. The banks motivated the violation with reference to:
the absence of a legal and regulatory framework governing the operation of a postponement of loans, and the repayment of such postponed loans; and
the non-existence of a decision by the Ministry of Finance.
Much room for exploitation when customers are in distress
Consider the complete event and implications 17<br>
slide18. 5. Conditions may serve to mitigate public interest effects
E.g. employment conditions
not only those preventing retrenchments, but those aimed at re-employment, e.g.:
requiring the merged entity to re-employ workers where vacancies arise
Empowerment conditions
Conditions speaking to regulatory safeguarding
Monitoring conditions regarding performance 18<br>
slide19. 6. In line with current approaches:
In line with current provisions of the Act making provision for:
the Commission having the ability to require the notification of “small” mergers for six months after the merger has taken place (see section 13(3) of the Act)
conditions to be imposed in relation to such mergers, e.g. divestitures (see section 13(5)(b)(ii) of the Act)
In line with dual emphasis on competition and public interest
In line with the Commission’s policy approach emphasising complexity – acting on the temporal dimension
Increased emphasis by competition authorities for “rapid market repair” – limit the time of potential harm to a minimum 19<br>
slide20. To summarise:
To provide competition authorities with the opportunity to review the merger within six months, and to impose conditions (if required) 20<br>
slide21. Any questions? 21<br>
slide22. Thank you! Ms Odie Strydom
Cell: 0833 819 419
odie@betweenity.africa
www.betweenity.africa 22<br>