“Dynamic financial sector will adapt to regulatory changes,” says Finance Minister

JOHANNESBURG, May 19, 2015

The financial services sector plays a crucial role in the South African economy and the evolving regulation for this sector is here to stay, Hon. Minister Nhlanhla Nene said this morning.

Speaking at the second annual Discovery Financial Planning Summit today attended by global and local thought leaders in financial services, the Minister cautioned the industry against complacency. “South Africa fared better than many countries in the aftermath of the global financial crisis, but there is no room for complacency.”

Nene said the South African financial industry is robust, and will adapt to the new industry regulations.

Minister Nene said his vision for a “robust financial services industry that embraces diversity”, is to treat its customers fairly and to develop products that deliver good value to its customers.

An important role the Minister sees for this sector is to team up with government, especially in assisting to cover the huge gap in infrastructure. The government has identified infrastructure projects to the value of R3 trillion, in which he believes the financial sector can play a role.

He made the point that a poorly regulated financial services sector can disrupt economies and people’s lives. It is also a sector that no economy can survive without. “Imagine an economy without the savings infrastructure of banks, the benefits of a medical aid, or other investment assets. It would lead to certain loss of assets and health, poverty in old age if there were no pension funds, and to a lack of credit facilities to support business with working capital.”

This justifies the higher standards that the financial services industry is held to and the ongoing regulation in the sector. “Regulations must have a purpose,” he said, and that is to protect consumers and provide stability for the industry.

Minister Nene said the Financial Services Board, the South African financial services regulator, has been proactive in the introduction of their Treating Customers Fairly (TCF) framework, which is important for the implementation of the twin peaks regulatory model.

“I am cognisant of the additional cost burden that the regulations in the aftermath of the financial crisis has on financial services companies, but this is outweighed by the benefits for the sector,” said Nene.

He called on the industry to take customers’ interests to heart. “By using behavioural economics, the industry must nudge people to do the right thing.” He lauded Discovery’s success in the use of behavioural economics to change people’s behaviour to make a positive change in many areas of their lives, such as encouraging healthy eating and facilitating better driving.

The Minister classified two important types of wellness: financial and physical, and emphasised a need to take interest in the financial wellness of people. He said employers have a role to play in looking after their employees and helping them to manage financial wellness, particularly in terms of overindebtedness.

The financial services industry and the government are working together on various industry issues.Minister Nene said progress has been made with retirement fund reforms, “as it is crucial to enable people to retire comfortably.”

Looking at broader social security, retirement fund reform is still on the table, especially to clarify misunderstandings between the industry and regulators. The private sector has a role to play in the National Development Plan, with issues such as unemployment, slow growth, inequality and poverty which can no longer be ignored.

The Minister said the financial services sector is a dynamic environment and he believes that the sector is proactive and can adapt to the new regulatory environment. His vision for the financial services sector is one that is robust, diverse and fair. He encouraged partnership between the industry and government and emphasised the design and delivery of financial products that are of value to all South Africans.

ENDS

Attached: Hon. Minister Nhlanhla Nene speaking at the Discovery Financial Planning Summit 2015

For media queries contact Felicity Hudson on 071 680 0234 or felicityh@discovery.co.za.

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