As the regulators continue their inevitable move to the enactment of the Conduct of Financial Institutions (COFI) Bill, we see the implementation of their ‘harmonisation’ plan – including some interesting queries to get their database up to date.
There’s plenty to keep us busy until then, and we’ve noted current updates for this month. Read on…
THE FINANCIAL SECTOR CONDUCT AUTHORITY (FSCA)
Warnings
In the seemingly endless stream of unscrupulous operators in the financial services industry, the FSCA continues to issue warnings to the public. Below is a summary of the most recent ones:
Individuals who are using the persona of Magda Wierzycka, the Chief Executive Officer (CEO) of Sygnia Limited to solicit investments using WhatsApp, Facebook, and Telegram.
A warning regarding Kabelo Edgar Pilusa was issued as he is soliciting funds from members of the public for investment purposes through Instagram without being an authorised financial services provider (FSP).
TradeFD is impersonating Tradelab (Pty) Ltd by using its FSP number 52058. TradeFD reflects on its website that it is authorised by the FSCA to provide financial services, however the FSCA confirms that TradeFD is not and that FSP number 52058 does not belong to TradeFD. Tradelab confirmed that it is not associated with TradeFD.
Primewave Capital is not a licensed FSP, but is soliciting funds from members of the public through Facebook for investment purposes, while promising unrealistic returns.
The FSCA received a complaint and issued a warning regarding SYW and Hannes Dupper who are operating a business that renders financial investment services and take investments against unsecured assets, without being authorised.
Scope Markets SA (Pty) Ltd and its CEO, Robert J van Eyden, are being impersonated by persons on WhatsApp offering an “Irrevocable Trust Agreement” to investors.
A warning was issued about individuals fraudulently posing as employees or representatives of EasyEquities, a platform operated by First World Trader (Pty) Ltd. Members of the public are offered high investment returns and then deposit funds into personal bank accounts. Once the funds are deposited, victims are asked to pay additional amounts under false pretences such as “withdrawal fees”.
FSCA three-year regulation plan
The FSCA released its three-year regulation plan for the period 1 April 2025 to 31 March 2028. The plan outlines the regulatory priorities, planned timelines, and strategic focus areas for transforming the financial sector’s regulatory framework. The plan emphasises transitioning to an outcomes- and principles-based regulatory approach, particularly through the COFI Bill, aligning with international standards, and addressing emerging risks.
When reviewing the timelines, it became apparent that there is still a long way to go before any real changes will be implemented.
Insurance industry sector data
The South African insurance sector demonstrated stable yet varied performance in the year ending March 2025, according to the latest report from the Prudential Authority.
- Entity Count: The number of registered insurers increased marginally to 158, with notable growth in life and composite microinsurers, and an increase in branches of foreign reinsurers from two to four.
- Life Insurance: Total assets for primary life insurers grew by 7.5% to R4.5 trillion. Investment income declined by 58%, driven by lower yields. Policy lapses dropped significantly.
- Cell Captive Life Insurers: Displayed asset growth of 1.2%, but profitability weakened due to increased claims and expenses. The lapse ratio rose slightly, while net premiums surged 28%.
- Non-life Primary Insurers: Modest asset growth of 0.5% and an 8% increase in gross premiums were offset by rising expenses. The claims ratio improved to 54.5%, contributing to a 49.9% rise in underwriting profits.
- Non-life Cell Captive Insurers: This sector experienced strong asset growth of 16.3%. Combined ratios improved markedly to 57%, although net premiums declined slightly. Investment income rose 24.7%.
- Captive Insurers: Demonstrated a sharp turnaround with net earned premiums up more than 570% and underwriting profitability recovering despite continued volatility in claims and premiums.
- Reinsurers: The sector saw a contraction, largely due to a major composite reinsurer restructuring into a branch. Non-life claims ratios spiked to more than 240%, negatively impacting underwriting results.
The sector’s solvency remained sound with Solvency Capital Requirement and Minimum Capital Requirement ratios exceeding minimum regulatory requirements. While profitability was mixed, especially among reinsurers and life cell captives, overall sector resilience continues to reflect strong capital adequacy and disciplined underwriting.
FSCA Regulatory Actions Report
The FSCA released its Regulatory Actions Report for 2024/2025. The report highlights the risk areas that will guide the FSCA’s enforcement priorities over the next year. The main risks noted are:
- Online harm including social media scams, signal providers, and finfluencers (“financial influencers”).
- Misuse of financial licences to front unauthorised operations.
- Regulatory examination fraud.
- Misleading advertising and inappropriate product claims.
- Non-compliance with Anti-Money Laundering (AML)/Countering the Financing of Terrorism (CFT) risk and control framework.
We’re not sure how the regulators aim to address these issues, but we can certainly expect some changes.
NATIONAL TREASURY (NT)
Major regulatory update: Banks Act amendments
On 26 June 2025, the National Treasury published significant amendments to the regulations issued under the Banks Act, 1990. These changes introduce substantial reforms to how South African banks must assess and manage credit risk. Here is a summary of the key developments.
New approaches to credit risk exposure
Banks using the standardised approach for credit risk measurement now have the discretion to calculate exposures using one of two specified methods. Importantly, the amendments set stricter rules around the use of external credit ratings – banks may no longer selectively apply different ratings (“cherry-picking”) across institutions or instruments. Consistency with internal risk models is mandatory, and the use of unsolicited ratings requires prior written approval.
Retail portfolio and SME exposures
The rules for treating retail exposures have been clarified and expanded. Standard risk weights of 75% now apply to qualifying exposures to individuals and SMEs, provided certain criteria are met. For well-behaved retail transactors – such as those with clean 12-month repayment histories – a preferential risk weight of 45% may apply. Where loans are unhedged for foreign exchange risk, a 1.5x multiplier is imposed on the applicable risk weight.
Revised residential property risk framework
Lending secured by occupied urban residential property is now subject to a more granular Loan-to-Value (LTV) based risk weighting framework. Risk weights range from 20% for loans with LTVs of 50% or lower, up to 70% for loans exceeding 100% LTV. Banks must meet enhanced underwriting requirements, including thorough income verification, prudent valuation policies, and evidence of occupancy. Where repayment depends materially on rental income or property sale proceeds, higher risk weights, up to 105%, apply. FX [foreign exchange] risk remains a key concern, with unhedged exposures incurring increased capital charges.
Treatment of commercial real estate and development lending
For commercial property loans, risk weights now depend on both the LTV ratio and the source of repayment. Lower LTV exposures may attract a minimum 60% risk weight, but where income is dependent on the property itself, risk weights may rise to 110%. Development and land acquisition loans that do not meet stringent underwriting and pre-sale criteria must be risk-weighted at 150%.
Defaulted exposures and impairments
A new tiered framework applies to exposures in default. Depending on the level of specific credit impairment, risk weights may vary from 150% down to 50%. Retail defaults can now be assessed at the level of individual obligations, rather than at borrower level, providing additional flexibility in capital allocation.
Expanded off-balance sheet treatment
Credit conversion factors for off-balance sheet exposures have been updated and clarified. Facilities range from 0% for non-binding commitments, up to 100% for direct credit substitutes and financial guarantees. Certain securitisation exposures may attract risk weights as high as 1250%.
Credit risk mitigation enhancements
The regulations strengthen the conditions for recognising collateral, guarantees, and netting agreements. Risk mitigation must be legally enforceable and verifiable, and cannot result in “double counting”. Credit protection must be proportionate and irrevocable, and banks are required to disclose details in line with Regulation 43.
Updated risk weighting tables
The amendments also introduce revised risk weights for sovereigns, corporates, banks, and multilateral development banks, as well as for exposures to equity, subordinated debt, and securitisation structures. Certain unlisted or speculative exposures now carry higher capital requirements, with tiered phase-ins for risk weights up to 400%.
PA documents supporting the banking regulations changes
The PA issued Directives D3/2025, D4/2025, D5/2025, D6/2025, D7/2025, and D8/2025, as well as Guidance Note G2/2025 and Circular 3 C3/2025 which introduce new requirements for banks effective from 1 July 2025. The changes align with the Umoja System Implementation Project, aimed at enhancing regulatory efficiency.
D3/2025: This Directive requires South African domestic systemically important banks to maintain a leverage ratio buffer equal to 50% of their higher loss-absorbency requirement, fully met with tier 1 capital, effective 1 July 2025, with capital distribution constraints applied if requirements are not met.
D4/2025: Directs domestic systemically important banks (D-SIBs) to complete and submit the BA 701 form, detailing regulatory and economic capital data, at a consolidated level. Submissions are required bi-annually (30 June and 31 December) within 60 business days, replacing Directive 7/2017.
D5/2025: Replaces Directives 4/2024 and 1/2025, mandating banks to submit various financial and risk-based returns as specified in annexures, effective from 1 February 2025. Returns must include certified forms BA 099 or BA 099A for foreign operations.
D6/2025: Reinforces D5/2025, directing banks to submit financial and risk-based returns via the Umoja system, accompanied by certified forms BA 0698 or BA 0699A, effective 1 July 2025.
D7/2025: The Directive instructs D-SIBs to submit bi-annual consolidated credit-related BA 200 and BA 210 returns at bank and controlling company levels, with specific assurance and audit requirements, effective for reporting periods ending on or after 31 December 2025.
D8/2025: The Directive sets threshold amounts for South African banks under revised Basel III standardised approach and internal ratings-based (IRB) approaches for credit, liquidity, and interest rate risks. Key thresholds include R12.5 million for retail exposures, R15 million for revolving exposures, and R600 million for corporate SME adjustments.
G2/2025: Provides detailed guidance for IRB banks on implementing Basel III post-crisis reforms, focusing on credit risk mitigation requirements (CRM), public sector entity exposure classification, and probability of default (PD) model design. It emphasises consistent risk parameter adjustments, legal enforceability of CRM instruments, and through-the-cycle PD models, effective 24 September 2025.
C3/2025: Clarifies granularity criteria for retail exposures. Aggregate exposures exceeding R12.5 million are excluded from the retail portfolio. Exposures above 0.2% of the portfolio (post-exclusions) are risk-weighted at 100%, while those below are at 75%, ensuring diversification.
All documents require acknowledgement of receipt by the CEO and external auditors.
PRUDENTIAL AUTHORITY (PA)
Prudential Authority annual report 2024/2025 highlights
The PA released its 2024/2025 Annual Report, emphasising its commitment to ensuring the safety, soundness, and integrity of South Africa’s financial sector. Despite a challenging macroeconomic and geopolitical environment, the financial sector demonstrated resilience, contributing significantly to gross domestic product growth.
The PA advanced its regulatory strategy, extending it to March 2026, focusing on Basel III post-crisis reforms, financial inclusion, and fintech supervision. Key achievements included strengthening prudential frameworks for banks, mutual banks, and cooperative financial institutions, alongside enhanced AML and counter-terrorism financing measures, contributing to South Africa’s progress toward exiting the Financial Action Task Force grey list. The PA conducted 22 AML/CFT inspections and imposed sanctions for non-compliance.
The report also noted robust capital adequacy in banks and insurers, with total banking sector assets growing 6.88% to R231 billion by March 2025, driven by increased loans and investments.
SOUTH AFRICAN RESERVE BANK (SARB)
CODI annual report
The Corporation for Deposit Insurance (CODI) having become operational on 1 April 2024, release its first annual report.
The report notes that CODI has established the Deposit Insurance Fund, now valued at R20 billion, to provide protection for covered deposits up to R100,000 per depositor per bank.
Key operational achievements over its first year of operation include the successful rollout of the first phase of its IT system for automated bank contributions, enhanced risk management, and robust compliance monitoring.
CODI aims to strengthen public confidence, align South Africa with global best practices, and reinforce the financial system’s resilience against potential bank failures.
A-PROOFED
Last month, I shared a little secret about my long-term relationship with a particular kind of writing, one filled with acronyms, semi-colons, and legislative updates that somehow find their way into my subconscious. What I didn’t mention at the time is that over the years, I’ve developed a quiet fondness for compliance writing. It may not be glamorous or exciting, but it holds a unique place in my professional heart.
For almost six years, I’ve been proofreading the monthly legislative update produced by Bryan Thomas. My job goes beyond simple grammar checks or fixing punctuation. I carefully review every detail to ensure clarity and precision. I verify that all links work properly, confirm that headings are correct, and check that the formatting remains consistent throughout. It’s not my job to rewrite the content or add flair. Instead, I make sure that the information lands as clearly and accurately as possible in the minds of the readers; that means you.
Compliance and insurance documents have a reputation for being highly technical and deliberately cautious in their wording. They’re not crafted to entertain or delight. However, that doesn’t mean they should be difficult to read or confusing. I pay close attention to searching for the small details that can make them difficult to understand. A missing word, an inconsistent acronym, or a misplaced comma or full stop might seem insignificant on their own, but together they can obscure the message or make things unclear.
Policy wordings need a bit of extra attention. Clear wording is really important because it affects how the policy is understood and used, and that is what matters most to clients. It might not be the most exciting work, but it definitely matters. The way the words are put together can have a real impact on clients and how things turn out for them.
I’ve also learned that my articles in this legislative update do actually get noticed. Who knew? Last month, I mentioned that an underwriting manager had contacted me to review its transporter policy wording. After a few weeks of radio silence, I started to wonder if they were just being polite, or maybe had forgotten about me. But no, they were serious. Just as the latest legislative update went live, I got another email, this time a formal request. It was a nice reminder that even the sometimes-overlooked world of proofreading can make a difference and spark some surprisingly real conversations. Who says that proofreading can’t be exciting?
Proofreading is meant to go unnoticed, like a ninja fixing mistakes in the shadows. But when your document is about to face clients, regulators, or big decision-makers, knowing that someone’s given it the once-over can save you from embarrassing slip-ups. It means that your message isn’t just correct, it’s polished, professional, and ready to impress.
If you want your documents to say exactly what you mean without any of the confusing stuff, I’m here to make that happen. Email me when you’re ready, and let’s make your words work as hard as you do.
Kim Hatchuel
083 657 3377 | kim@a-proofed.co.za
www.a-proofed.co.za
