opening remarks by francois groepe, deputy governor of the south african reserve bank, at the public workshop on proposals to establish a deposit insurance scheme for south africa south african reserve bank, pretoria 23 august 2017 introduction good afternoon, distinguished guests, ladies and gentlemen. it gives me great pleasure to welcome you to this workshop on a possible deposit insurance scheme for south africa. we are privileged to have present here today fellow central bankers, commercial bankers, financial market participants, regulators, public sector representatives, academics, members of the media fraternity, and other staff members of the south african reserve bank ( sarb ). in particular, i would like to extend a very warm welcome to the representatives from the world bank, which has been very supportive over the past two to three years in the formulation of the proposals that will be discussed today, as well as to the representatives from other central banks in the common monetary area that are present. we hope that this workshop will be the first step in expanding our fruitful cooperation in the area of managing bank failures. the sarb and national treasury are currently developing new legislation to put in place a framework that will facilitate the resolution of failing financial institutions in an orderly and transparent way, one which seeks to minimise the use of government funding to bail out such institutions. this new resolution framework is an important pillar of the sarb ’ s expanded and explicit financial stability mandate, as contained in the financial sector regulation bill. a key component of such a resolution framework is the establishment of page 1 of 6 an explicit deposit insurance scheme to ensure that the depositors who are most exposed to an asymmetry of information and thus least able to hedge themselves against financial loss in the event of a bank failure are protected against any losses and hardship that may stem from a bank failure. this framework is expected to enhance the public ’ s trust in the banking sector, which is an important aspect of financial stability. the implementation of a prefunded deposit insurance scheme will bring about closer adherence to the key attributes of effective resolution regimes and to the core principles of effective deposit insurance systems issued by the financial stability board and the international association of deposit insurers respectively. south africa has a well regulated and stable banking sector, but one that is also quite concentrated. where one tends to find relatively regular failures of small banks in some other countries, bank failures in south africa are rare – although when they do occur, they are typically more disrupting. because bank failures in south africa do not occur often and

manual. 6 but the methodological effort is never - ending : we are now working to improve the supervisory review and evaluation process ( srep ), partly in order to promote convergence in the prudential treatment of significant and less significant banks. 7 further improvements are currently being discussed : how to streamline the decision - making process ; how to enhance cross - fertilization in the on - site teams and their community spirit ; and how to improve coordination between prudential supervision and anti - money - laundering oversight. the discussions within the ssm board, the ncas ’ input gathered through written procedures and the contribution of technical working groups have helped to address all the relevant issues, even the most controversial ones. for instance, regarding non - performing loans ( npls ), while everyone agreed on the need for the banks most affected by this problem to get rid of their npls, there was much discussion about how to proceed at the ssm level. the solution, which we are draghi ( 2015 ). ecb ( 2018a ). ecb ( 2018b ). now working on, is based on a bank - by - bank approach8 and seems to go in the right direction, without entailing any illegitimate foray into the regulatory field. we should take into full account the specific business models of banks and avoid unjustified differences of treatment. 3.... and with the srm the performance of the new crisis management framework is less easy to assess. according to the existing legal framework, if problems arise in a bank, first the ssm is supposed to engineer early intervention to redress the situation. if, in the end, the bank is labelled ‘ failing or likely to fail ’, the srm comes into play. the srm is composed of the single resolution board ( srb ), acting as a central resolution authority, and the 19 national resolution authorities ( nras ) ; it has within its remit both significant and less significant banks, but the latter only if they have cross - border activities. the srm decides first of all whether there exists a public interest to justify the rescue of a failing bank under the common ‘ resolution ’ procedure. if not, the bank must be liquidated according to national rules. the european commission ensures that the national government ’ s financial support, if any, complies with state - aid rules. i do not want to recall here italy ’ s painful experience with the four smallto - medium