Pityana’s calls for increased scrutiny of banking regulator’s powers

BUSINESS leader Sipho Pityana has described the SA Reserve Bank’s (Sarb’s) Prudential Authority (PA) as a rogue institution that places itself above the law.

Pityana recently secured a major victory against the PA when it was found that it had unlawfully blocked his appointment to the Absa board.  

“What was the basis for their objection? They never said I was unfit,” Pityana said.

“The Reserve Bank first indicated they had issues with my nomination by suggesting I may not be a ‘fit and proper person’ — without ever formally asserting that I was implicated in harassment or any misconduct,” Pityana said.

“In fact, in all the court papers, they stated that they never asserted I was unfit or unqualified. They never actually said I wasn’t a fit and proper person.”

The PA acted without legal justification, relying instead on informal, “backroom processes” to strong-arm the Absa Board into rejecting Pityana.

The PA had firmly defended its legality and conduct amid debates over its role in the appointment of bank executives. Central to its arguments was that it had not acted unlawfully or beyond its powers under the Banks Act.

In court filings, the PA stated: “The Authority always acted lawfully,” affirming that its interactions with banks were in line with regulatory standards.

Regarding the nomination process itself, the PA highlighted its statutory authority to review and potentially object to candidate appointments. It said: “Section 60(5) of the Banks Act read with Regulation 42(1)(a) of the Regulations and section 60(5)(b) of the Banks Act provide that the notice must reach the Authority at least 30 days before the proposed date of appointment,” and that “the Authority may object to the proposed appointment by means of a written notice, stating the grounds for objection.”

The PA further argued that its oversight included providing early guidance to banks. “Financial institutions often engage with the Authority in advance of any nomination of directors or senior executives. They seek early guidance regarding any fitness or proprietary concerns,” it said, underlining that these interactions were part of the regulatory process and were intended “to facilitate compliance with the statutory requirements by banks”.

In her judgment, Judge Luleka Flatela underscored that the PA’s actions went beyond these prescribed procedures. 

  “The First Respondent acted unlawfully and in excess of its powers per the Banks Act 94 of 1990 by engaging in an informal process with the Second and Third Respondents in connection with the nomination of the Applicant as Chairperson of the Second and Third Respondents’ board of directors, and in particular by notifying the Second and Third Respondents of its objection, alternative intention to object to the Applicant’s nomination.”

Pityana did not mince words when describing the PA’s conduct: “They knew the process they were following was unlawful. Everything they submitted in court suggested they understood the unlawfulness of their actions but looked for excuses to justify using the informal process.”

 Pityana said he was vindicated by the court outcome.  

“I feel confident in our Constitution, in our legal system, and in the independence of our courts. But I also feel resentful that there doesn’t seem to be any consequence management for the leadership at the Reserve Bank who acted this way. If left unchecked, they are capable of doing this to someone else.”

Cape Times