The Prudential Authority (PA) is in the business of assuring stability – a scarce commodity in today’s uncertain world.
The PA does this by supervising entities like banks, insurers and financial market infrastructures, to ensure that individual entities are prudently managed. It also helps the South African Reserve Bank (SARB) meet its statutory objective to keep the overall financial system safe.
For the period under review, the story is mainly about building resilience. We completed the Basel III reforms, concluding our part in the great international project to institutionalise the lessons of the global financial crisis. We also saw South Africa exit the Financial Action Task Force greylist – a project in which the PA, together with other regulatory entities, have invested substantial time and resources.
These accomplishments have made the system stronger.
Message from the CEO
Our work continues to be guided by our mandate to promote safety and soundness in the sector, while aligning with the strategy of the SARB.
The global macrofinancial environment in which we operate remains dynamic, shaped by an uncertain policy environment, shifting economic conditions, geopolitical and trade tensions and a calibration of international regulatory standards to emerging risks.
These factors have increased volatility and uncertainty in global markets and underscored the importance of resilience and adaptability within our financial system.
The PA remains committed to safeguarding stability, while responding proactively to the risks and opportunities presented by the broader international context.
The Financial Sector Regulation Act sets out the PA’s governance structure, resources, financial management and reporting obligations.
The PA regulates and supervises financial institutions to promote a safe and resilient financial system in South Africa, underpinned by robust prudential standards and regulations.
The Prudential Committee (PruCo) is established in terms of the FSR Act to oversee the management and administration of the PA, and to ensure it operates efficiently and effectively. The PruCo may establish subcommittees for the PA and assign functions it deems necessary.
In a rapidly evolving world, responsive adaptation of legislation empowers resilience, ensuring that legal frameworks support innovation and stability. The regulatory strategy sets out the PA’s key priorities. The PA adopts a collaborative and consultative approach to prudential regulation and supervision.
In an environment marked by uncertainty and rapid change, robust regulatory frameworks are essential to underpin stability.
The PA’s regulatory strategy plays a pivotal role in outlining measures that the PA will put in place to protect the safety and soundness of the financial system.
The PA receives applications for new financial institution licences. The PA also receives applications from regulated institutions to expand their business activities and from auditors of prudentially regulated institutions. In assessing these applications, the PA considers financial viability, resilience to withstand economic shocks, regulatory changes and unexpected challenges in applicants’ sectors, ensuring depositors and policyholders are not put at risk.
This work protects the stability and integrity of the financial system.
The PA assessed whether key persons have the necessary skill, experience, ability and integrity to manage and provide oversight of regulated institutions, in accordance with the prescribed ‘fit-and-proper’ framework.
The PA also conducted independent assessments to verify criminal background checks, related sanctions and adverse media to determine the fitness and propriety of executive officers, key persons and significant owners of regulated financial institutions.
Effective supervision is the ability to develop a comprehensive view of regulated financial institutions based on an understanding of their business models.
The PA uses supervisory judgement and forward-looking analysis to assess the resilience of financial institutions, how well they are governed and what risks they may pose to the wider financial system. Supervisory work is risk-based and proportionate, focused on identifying problems and detecting weaknesses early to act timeously and appropriately.
At present, the financial system remains stable and continues to function well but faces various risks. At a global level, risks are elevated due to policy uncertainty amid geopolitical events.
During the review period, the PA considered 166 referrals relating to non-compliance with financial sector laws and the Financial Intelligence Centre Act. In response to instances of non-compliance, the PA enforces adherence through appropriate regulatory actions, which could include issuing cautions, granting condonations and imposing administrative penalties.
The PA has a statutory responsibility to promote and maintain the safety and soundness of financial institutions and the stability of the financial system. Allowing non‑viable or severely undercapitalised entities to continue operating poses systemic risks, including the possibility of contagion, erosion of market confidence and adverse spillover effects to otherwise sound institutions.
