June 30, 2022

New banking laws proposed for South Africa

South Africa’s newest state seize report recommends the introduction of latest banking laws – together with laws round when accounts could also be closed.

The report’s creator, chief justice Raymond Zondo, made the suggestions following the closure of 4 financial institution accounts linked to the controversial Gupta household.

First Nationwide Financial institution, Normal Financial institution, Absa and Nedbank all closed accounts, citing authorized obligations, after a number of suspicious transactions had been made. The banks additionally cited potential reputational harm as a motive for the account closure.

Zondo raised particular issues in regards to the financial institution accounts being closed with out shopper session, resulting in the fee making varied findings concerning the ‘unfair’ components of unilateral financial institution terminations.

“In Bredenkamp and Others v Standard Bank of SA Ltd the Supreme Court of Appeal (SCA) decided that a bank was not obliged to hear its client’s side of the story before the bank could terminate the relationship,”

“It seems that the SCA’s basis for this decision was that the relationship between a bank and a client is a contractual one,” he mentioned.

In distinction to the SCA’s resolution, Zondo mentioned it’s unacceptable that an establishment as highly effective as a financial institution should not have any obligation to listen to what a shopper has to say earlier than the financial institution could shut the shopper’s account.

He added that this doesn’t align with South Africa’s constitutional values, and a choice to shut a shopper’s financial institution might have varied far-reaching penalties.

On account of banks’ huge energy, no severe enterprise would be capable to run within the nation if financial institution accounts may very well be terminated unilaterally, mentioned Zondo. Relying on the scale of an organization, this might have dramatic results on individuals retaining their jobs, he mentioned.

It’s solely honest that banks be required to afford their purchasers the chance to be heard or to make representations to indicate that there aren’t any grounds for the financial institution to be involved if they’re suspected of suspicious behaviour, mentioned Zondo.

Zondo really useful that new laws be enacted to introduce the requirement of ‘fairness’ in bank-customer relationships, or that present laws is amended to account for the requirement.


 

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