Answer to Question #250545 in Economics for Pretty

Question

How SA central bank's MPC may use capital controls

Answer 1

Briefly speaking about the banking system, it should be noted that its components include the Reserve Bank of South Africa (central bank), commercial banks and specialized public financial institutions: South Africa Development Bank (financing of infrastructure projects in the SADC (Southern African Development Community) region), Corporation industrial development (industrial projects), the Land and Agricultural Bank (lending to agriculture.) In total, there are 44 commercial banks, 9 branches, as well as 60 representative offices of foreign banks in the country.

The banking system of South Africa is well developed and well regulated. Over the past couple of years, many foreign banks and investment institutions have started operating in South Africa. Banking Act is based mainly on the same legislation that is in force in the United Kingdom, Australia and Canada.

Although no formal agreements have been reached on international banking regulatory policy, changes have been made to the peer review process regarding exchange controls and financial market legislation, making South Africa more attractive to investors.

The National Payment System Act of 1998 was enacted to bring the South African financial settlement system in line with international practice and systemic risk management. The National Payment System Act places great powers and obligations on the South African Reserve Bank in terms of ensuring settlements.

The Payments Association of the Republic of South Africa (PASA), under the supervision of the Reserve Bank of South Africa, has facilitated the implementation of clearing house agreements. It also introduced agreements related to settlement, clearing and net settlement and rules aimed at achieving certainty and mitigating systemic and other risks in interbank settlements. All these innovations have provided the Republic of South Africa with a worthy place in international interbank settlements. Investment and merchant banking remains an area of ​​fierce competition, and the four largest banks - Standard, Firstrand, Nedkor and Absa - continue to consolidate their retail banking activities and cover about 90% of all retail settlements over the past three years.