‘A new macro-prudential policy framework for South Africa’
The South African Reserve Bank (SARB) has today, 9 November 2016, published for public comment a discussion document, ‘A new macro-prudential policy framework for South Africa.’
The discussion paper outlines the SARB’s proposed approach to executing its financial stability policy mandate. It discusses the institutional structure, the objectives of macro-prudential policy, and the decision-making process to be applied in the process of activating macro-prudential instruments. It also describes a range of possible instruments to be used in mitigating systemic risk.
Background
South Africa launched a formal review of its financial regulatory system in 2007, resulting in a number of policy papers and culminating in several drafts of the Financial Sector Regulation Bill (FSR Bill) being published. The FSR Bill assigns primary responsibility to the SARB for protecting and enhancing financial stability, and seeks to ensure cooperation between regulators in pursuing the stability of the financial system.
Macro-prudential policy refers to policies aimed at mitigating risks to the financial system as a whole (systemic risk). Systemic risk refers to the risk of the disruption to the provision of financial services with serious consequences for economic activity. Systemic risks can be cyclical or structural. Cyclical risks are those that build up over time, for example a boom in the availability of credit and asset price bubbles, and burst at a certain point. Structural risks refer to those risks that arise from the interconnectedness of the financial sector companies and the resultant spread of risks across the financial system as a whole.
Financial stability is not an end in itself but, like price stability, is generally regarded as an important precondition for sustainable economic growth, development and employment creation. Financial stability refers to a financial system that is resilient to systemic shocks, facilitates efficient financial intermediation and mitigates the macroeconomic costs of disruptions in such a way that confidence in the system is maintained.
Correspondence regarding the consultation should be addressed to:
Head: Financial Stability Department
South African Reserve Bank
P O Box 427
Pretoria 0001
Tel: 012 313 3601
E-mail: SARB-MacroPru@resbank.co.za
The closing date for enquiries, suggestions or comments on this document is 31 January 2017. When responding, please state your affiliation or whether you are doing so in your personal capacity. Please note that a summary of responses may be published unless respondents explicitly request otherwise.
