Abstract
South Africa’s banking sector has been characterised as a relatively stable environment, strengthened by robust regulatory oversight and prudential policies. However, although this country’s banking system is well-regulated, it remains susceptible to systematic risks that could lead to the failure of major financial institutions, necessitating effective and sustainable resolution mechanisms. This study examines the evolution of South Africa’s bank resolution framework, transitioning from conventional insolvency procedures, which have been criticised for their over-reliance on taxpayer-funded bailouts and limited focus on creditor and shareholder accountability, to the adoption of structured resolution mechanisms.
Drawing on case studies such as African Bank’s collapse in 2014, this study evaluates the lessons learnt and their implications on the current resolution framework. These cases highlighted the need for a proactive and dynamic resolution framework to prevent disruptions to the financial system caused by bank failures and protect stakeholder interests. South Africa’s current bank resolution framework operates under the guidance of the South African Reserve Bank (SARB). It draws on international standards such as the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions.
Central to this research is the new model for bank resolution in South Africa, which is designed to address the unique challenges of the country’s financial sector. The model emphasises the implementation of bail-ins to minimise taxpayer burden, the establishment of a resolution fund to support distressed institutions, and enhanced coordination between regulatory authorities and the private sector. Moreover, the model incorporates lessons from global prudential standards to ensure South Africa’s financial system remains globally competitive while safeguarding domestic stability.
This dissertation concludes with practical recommendations for strengthening South Africa’s bank resolution framework, advocating adaptive strategies to meet the financial sector’s dynamic challenges. The research underscores that an effective bank resolution framework is vital for sustaining economic stability, promoting financial resilience, and safeguarding public interest in an increasingly interconnected financial landscape.