## South African Reserve Bank: Central Bank Transparency Code Review (1zafea2024002-print-pdf) ## Source details **Canonical URL:** [South African Reserve Bank: Central Bank Transparency Code Review (1zafea2024002-print-pdf)](https://www.imf.org/-/media/files/publications/cr/2024/english/1zafea2024002-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2024/english/1zafea2024002-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2024/english/1zafea2024002-print-pdf.pdf.json) --- ### Mission scope, approach, and macro context - Mission approach and timing - Desk review and almost forty meetings (hybrid/virtual) with SARB management, staff, and external stakeholders. - Mission took place from May 13–27, 2024. - Review methodology - Principle-by-principle mapping against the IMF Central Bank Transparency Code (CBT). - Key transparency dimensions: (i) timeliness; (ii) periodicity; (iii) quality of disclosure (accessibility, ease of understanding). - Macroeconomic background and near-term priorities - Growth decelerated to 0.7 percent in 2023 (from 1.9 percent in 2022). - Headline inflation remained within the SARB target range (3–6 percent) since mid-2023. - Near-term priorities: ensuring fiscal sustainability; safeguarding macro-financial stability; resolving the energy crisis; initiating reforms to lift potential growth and reduce poverty and inequality. - Binding constraints: limited fiscal space; product and labor market rigidities; governance and corruption vulnerabilities; rising policy uncertainty; unfavorable external environment. ### Overall assessment and reputation - Transparency benchmark - IMF assesses SARB’s transparency as high and broadly aligned with expanded and comprehensive CBT practices. - SARB’s transparency commitment embedded in its 2025 Strategic Plan and valued by stakeholders. - Reputation and policy record - SARB considered one of the most reputable South African public institutions. - Notable policy actions: market intervention in March 2020; prompt post-pandemic rate increases; launch of new Monetary Policy Implementation Framework (MPIF). ### Major findings: governance, legal framework, and autonomy - Legal framework and disclosure gaps - Core legislation (Constitution; SARB Act) available publicly, but: - No single dedicated website section for regulations, directives and notices. - PAIA precedence over SARB Act not explained on website or Annual Report. - Scope of judicial review and extent of legal protections not clearly explained. - Autonomy and institutional interactions - Constitution and SARB Act enshrine institutional autonomy, but certain Ministerial powers in SARB Act may appear to conflict with constitutional autonomy; MOUs and exchange-of-letters with National Treasury (NT) exist but are not fully disclosed. - Financial autonomy and GFECRA specifics - GFECRA balance rose from R1.8 billion in March 2006 to R507 billion in January 2024 (7 percent of GDP), largely from rand depreciation. - Agreement to distribute about half of the GFECRA (i.e., R250 billion): - SARB’s Contingency Reserve: R100 billion. - Remaining R150 billion to NT executed in tranches: 2024: R100 billion; 2025: R25 billion; 2026: R25 billion. - SARB intends not to sell foreign exchange or gold to realize gains; instead monetize unrealized gains by replacing unremunerated GFECRA liability with new liabilities to commercial banks (excess reserves remunerated at the repo rate). - Legal mechanism: transfers to/from GFECRA effected only by Appropriations Bill (an Appropriations Bill awaiting signature as of May 2024). SARB subsequently published the Gold and Foreign Exchange Contingency Reserve Account Defrayal Amendment Act in June 2024. - Key governance statistics and structures - Board: Governor (chair), three Deputy Governors, eleven non-executive directors. - Private shareholders: about 800, elect seven non-executive directors (no policy influence). - SARB subsidiaries disclosed: South African Mint Company; South African Bank Note Company; Corporation for Public Deposits (CPD); Corporation for Deposit Insurance (CODI). ### Monetary policy framework, implementation, and transparency gaps - Framework and instruments - Inflation-targeting framework since 2000 with floating exchange rate. - Official inflation target range: 3 to 6 percent; 4.5 percent midpoint emphasized in 2017. - MPC meets six times a year; MPC currently consists of six members (Governor, three Deputy Governors, two senior SARB officials). - Principal instrument: repurchase (repo) rate; implementation via interest rate corridor and new tiered-floor MPIF. - Required bank reserves: 2.5 percent of liabilities (unchanged since 1998). - New Monetary Policy Implementation Framework (MPIF) - Consultation paper: November 2021; explanation papers: May 2022. - Implementation period: began June 8, 2022; completed over 12 weeks to August 24, 2022. - Transition metrics: excess reserves moved from a shortage of around R30 billion to a surplus of R50 billion. - Outcomes: improved transmission (overnight rates close to repo), almost 30 banks participating, migration to a secured interbank market. - Transparency strengths and recommended improvements - Strengths: comprehensive MPS and MPR publications; model-based forecasts (Quarterly Projection Model) and data available. - Gaps and recommendations: - Clarify process for reviewing the inflation target and the respective roles of SARB and NT, with documentation specifying responsibilities. - Provide more information on dissenting votes in MPC deliberations (consider non-attributed explanations). - Include alternative risk scenarios in the Monetary Policy Review (MPR) to illustrate uncertainty and reaction function. - Clarify ownership/accountability for monetary publications (MPS authored by Governor’s office; MPR lacks explicit MPC ownership preface). ### FX reserve management, GFECRA implementation, and communication - Reserve management disclosures - Investment Policy published; Investment Guideline updated annually with NT input but not publicly disclosed in full. - Monthly publication: official foreign exchange reserves, including gross reserves and foreign currency liabilities; currency composition disclosed annually in audited financial statements. - Recommendations: - Disclose non-market-sensitive components of the annual Investment Guideline and key macrofinancial inputs affecting adequacy/liquidity parameters. - Publish detailed (not market sensitive) information on calculation of adequate FX reserves under the GFECRA framework and related updates as needed. - Increase frequency of currency composition publication (currently annual). - GFECRA communication shortcomings and proposed strategy - External confusion about roles of SARB and NT and about SARB financial autonomy following GFECRA distribution announcement. - Proposed communication actions: - Establish a communication strategy and timeline for transition, given anticipated money market impacts. - Create a dedicated GFECRA webpage and engage stakeholders through seminars and workshops. - Publish the new rules-based framework (or sanitized components) once finalized. - Consider explicitly disclosing methodologies for assessing the Contingency Reserve and FX reserve adequacy. - Report monthly movement in the GFECRA balance during the transition period (currently rolled into “Other Liabilities” in Monthly Statement, masking the balance). ### Financial stability, macroprudential policy, and stress testing - Mandate and publications - FSR Act provides SARB mandate to protect and enhance financial stability; Financial Stability Review (FSR) published twice a year. - Semiannual stress tests (CSST for banks, ICSST for insurers) conducted; 2023 CSST covered six systemic banks representing 93 percent of banking sector assets. - Macroprudential actions disclosed (example: cycle-neutral CCyB of 1 percent; phase-in from January 2025 to be fully implemented by 31 December 2025). - Transparency recommendations - Publish financial stability decisions more timely (not only via FSR). - Provide more detailed non-sensitive information on FSOC and FSCF meetings (tasks and outcomes), while preserving confidentiality. - Publish ex-post evaluations of macroprudential measures’ effectiveness. ### Emergency Liquidity Assistance (ELA) and LOLR - Recent enhancements and practices - ELA Position Paper (2022) outlines criteria, legal requirements and collateral rules; disclosure of ELA is at SARB discretion to protect bank viability/financial stability. - Market-wide support (March–April 2020 bond-buying program) was widely disclosed and analyzed. - Recommendation - If a framework for systemic market dysfunction is developed, consider disclosing key elements to benefit market participants. ### AML/CFT supervision, internal controls, and disclosure gaps - Supervisory responsibilities and public disclosure - Prudential Authority (PA) is AML/CFT supervisor for banks, life insurers and clearing system participants; FinSurv supervises ADLAs. - PA and FinSurv publish laws, guidelines, and administrative sanctions; PA maintains an AML/CFT webpage with sectoral risk assessments for banking and life insurance. - What is not routinely disclosed: - Detailed supervisory resources and methods (types/scope of inspections, supervisory team composition and budget). - Remedial actions taken by supervised institutions following inspections or sanctions. - FinSurv has not yet published ADLA sector ML/TF risk assessments. - Internal SARB AML/CFT controls - AML/CFT Team (3 staff) within CMD of RMCD; activities tracked and included in an Annual Compliance Report; IAD audits CMD triennially and reports to BAC and BREC. - Public disclosure gaps: organization, mandate, policies, audit schedule and follow-up are not publicly posted. - Recommendations - PA and FinSurv should publish sanitized summaries of supervisory approaches, regular statistics, and remedial action outcomes. - Establish an SARB AML/CFT-dedicated webpage summarizing internal AML/CFT control activities, resources, and linking to relevant audit procedures; publish a brief summary of the Annual Compliance Report where possible. - IAD to consider publishing, in general terms, key findings/recommendations from audits on AML/CFT controls, subject to operational sensitivities. ### Communications, public engagement, and institutional transparency - Communication channels and outreach - Extensive public engagement vehicles: Monetary Policy Forums (MPFs), Financial Stability Forum (FSF), Economic Roundtable, Public Outreach Program, MPC School Challenge (12th year; more than 400 schools), University Chairs Program, active social media presence. - SARB redesigned website in last five years; publications accompanied by engagements, livestreams, and recordings. - Identified weaknesses and recommendations - Institutional communications architecture is not consolidated publicly; internal communication policy and stakeholder engagement strategy are not published. - Accessibility and search functions on website warrant improvement. - Recommendations: - Streamline and publish a summary of key communication documents and tools; disclose role, functions, and staffing of communications unit. - Systematize communication arrangements for complex topics (GFECRA, inflation-target review) and improve website accessibility and notification features. ### Fintech, CBDC exploration, and innovation - Fintech activities and initiatives - SARB Fintech Unit established 2017; IFWG Innovation Hub (intergovernmental) oversees regulatory sandbox. - Key projects: - Project Khokha (DLT wholesale settlement proof-of-concept). - Project Khokha 2 (tokenized securities settlements; wholesale CBDC proof-of-concept). - Project Dunbar (multi-central bank m-CBDC for cross-border payments). - CBDC feasibility study status: in progress as of June 2024. - CBDC design principles stated: universally available, generally accepted medium of exchange, pegged 1:1 parity with the rand. ### Numbered key recommendations (as presented in source) - 1. Strengthen transparency of SARB’s legal structure and autonomy; explain safeguards for security of tenure and financial autonomy of SARB subsidiaries and GFECRA reform. - 2. Disclose additional information on risk management (group perspective); publish dedicated reporting on internal audit mandate/activities; publish Ethics Policy (or summary). - 3. Streamline communications: publish summary of key communication documents; provide comprehensive overview of tools, channels, processes; improve website accessibility. - 4. Clarify review process for monetary policy framework and setting inflation target (NT in consultation with SARB); disclose documentation specifying responsibilities. - 5. Improve monetary policy transparency: provide more information on dissenting votes; include alternative risk scenarios in MPR; clarify ownership of communication vehicles. - 6. Enhance FX reserve transparency: disclose non-market-sensitive components of Investment Guideline; publish detailed (non-market sensitive) info on calculation of adequate FX reserves under GFECRA. - 7. Disclose financial stability decisions more promptly and publish interagency committee activities (tasks/outcomes) while preserving confidentiality. - 8. Proactively disclose AML/CFT supervisory policies, resources and remedial actions taken by supervised institutions. - 9. Make public general information on SARB’s internal AML/CFT control function via a dedicated webpage summarizing activities, outcomes and audit procedures. - 10. Ensure structured and regular transparency of SARB–government interactions: services provided, respective responsibilities, and cooperation documents. ### Additional notable statistics and operational metrics preserved from the source - GFECRA balance: R507 billion in January 2024 (7 percent of GDP); previously R1.8 billion in March 2006. - Agreed distribution of GFECRA: R250 billion (about half); SARB contingency reserve: R100 billion; NT tranches: 2024: R100 billion; 2025: R25 billion; 2026: R25 billion. - MPIF transition: excess reserves from a shortage of around R30 billion to a surplus of R50 billion. - MPC meetings: six times per year. - Required bank reserves: 2.5 percent of liabilities. - Staff and human capital: SARB’s 2 381 employees (data from “People matters”); detailed diversity and personnel statistics published in Annual Report. - Stress test coverage: 2023 CSST covered six systemically important banks representing 93 percent of total banking sector assets. - CCyB decision: 1 percent cycle-neutral buffer; phase-in commences January 2025 and to be fully implemented by 31 December 2025. - CBDC design requirement: pegged at a one-to-one parity with the rand; feasibility study in progress as of June 2024. *Source: 1zafea2024002-print-pdf - IMF staff mission report and SARB-provided materials (EXECUTIVE SUMMARY and selected chapters).* ### EXECUTIVE SUMMARY __________________________________________________________________________ 5 ### EXECUTIVE SUMMARY ### Overview - The South African Reserve Bank (SARB) sets a high benchmark for transparency and is considered by the external stakeholders one of the most reputable and effective public institutions in South Africa, and globally. - The SARB’s transparency practices are broadly aligned with expanded and comprehensive practices as defined by the IMF Central Bank Transparency Code. - The SARB’s commitment to open and transparent communications is embedded in its 2025 Strategic Plan and is highly valued by external stakeholders. ### Commendable practices - The SARB demonstrates commendable transparency in: - human capital management; - Emergency Liquidity Assistance (ELA); - monetary and macroprudential policies; - implementation of exchange controls. - External stakeholders praised proactive and comprehensive policy communications during the COVID-19 pandemic. - The SARB’s successful launch of its new monetary policy implementation framework (MPIF) was largely attributed to timely and well-articulated communications and engagement. - The SARB actively promotes understanding of its policies and actions across a wide set of stakeholders, including the general public, by using various communication tools and channels. ### Communication and institutional recommendations - The SARB’s strategic commitment to open and transparent communications should be anchored in a more robust institutional communication framework. - Issues identified: - accessibility and consolidation of information remain an issue; - institutional foundations of interactions could be improved. - Recommended enhancements: - further strengthen the role of the communication unit; - effectively manage key messages and communication tools; - deal with specific communication challenges. ### GFECRA (Gold and Foreign Exchange Contingency Reserve Account) and financial autonomy - Following accumulation of substantial unrealized valuation gains in the GFECRA account, the SARB and the National Treasury (NT) reached an agreement earlier this year to distribute half of the GFECRA balance between the national budget and the SARB’s contingency reserve. - A complex aspect: gains in the GFECRA are both realized and unrealized, requiring a methodology to calculate the portion that can be deemed realized. - The proposed transaction was not well-understood by external stakeholders and raised confusion about: - the SARB’s financial autonomy; - the respective roles of the SARB and the NT. - Going forward, the SARB would benefit from: - establishing a clear communication strategy around the GFECRA; - disclosing its features and the reform timelines, given the potential impact on the money market; - establishing a dedicated page on the SARB’s website; - reaching out to stakeholders through seminars and workshops. - Note: The SARB subsequently published in June 2024 the Gold and Foreign Exchange Contingency Reserve Account Defrayal Amendment Act. ### Governance, accountability, and AML/CFT transparency - Enhance transparency of well-established governance arrangements and policies in some areas, including: - dissemination in a structured and accessible manner about the relationship with government and other financial sector regulators; - publishing an overview of AML/CFT supervisory policies, including efforts to implement the risk-based approach; - disclosing key tenets of the internal AML/CFT control function. - The SARB’s internal accountability arrangements are already comprehensive; suggested disclosures include: - additional information on the risk management framework from a group perspective; - dedicated reporting on the mandate and activities of the internal audit function; - publishing the Ethics Policy (or a summary thereof). - Make readily available to the public general information on the SARB’s internal AML/CFT control function by establishing a dedicated webpage that summarizes its activities and outcomes and provides a link to information on the relevant audit procedures. ### Monetary policy transparency - The SARB’s monetary policy framework is comprehensive, transparent and understandable, with increased transparency and accountability through appropriate communications and model-based forecasts. - Areas for greater transparency: - the process for reviewing the inflation target and the respective roles of the SARB and the NT in this process; - providing more information on dissenting votes in Monetary Policy Committee (MPC) deliberations; - including alternative risk scenarios in the Monetary Policy Review (MPR); - clarifying ownership of various communication vehicles. - Recommendation: Documentation should be disclosed that specifies the respective responsibilities of each institution in the review process and in setting the inflation target. ### FX reserves, financial stability, and interagency transparency - Enhance transparency of FX reserve management by disclosing key, underlying considerations or non-market sensitive components of the annual Investment Guideline. - Transparency in the implementation of the GFECRA framework would benefit from disclosing detailed (not market sensitive) information on the calculation of the level of adequate foreign exchange reserves and related updates, as the need arises. - Disclose financial stability decisions in a timely manner via statements and press releases. - Publish information on the activities of interagency committees, including tasks and outcomes for each meeting, while keeping sensitive information confidential. ### Key recommendations (numbered as in the source) - 1. Strengthen the transparency of certain aspects of the SARB’s legal structure and autonomy, by providing a general explanation of the SARB’s legal protections and its institutional and functional autonomy, indicating the safeguards available to ensure the security of tenure for SARB decision-making bodies and protection of its officers and employees against legal suits, and enhancing the disclosure of its financial autonomy with respect to the operations of SARB subsidiaries and the reform of the GFECRA settlement framework. - 2. Building on the already comprehensive transparency of the SARB’s internal accountability arrangements: disclose additional information on the risk management framework from a group perspective; establish dedicated reporting on the mandate and activities of the internal audit function; and publish the Ethics Policy (or a summary thereof). - 3. Streamline the SARB’s communication framework and make it more transparent to the public, by enhancing further a proactive institutional approach to communications; publishing a summary of the SARB’s key communication documents; providing a comprehensive overview of communication tools, channels, and processes; and improving the website’s accessibility. - 4. Clarify the process of reviewing the SARB’s monetary policy framework and setting the inflation target by the National Treasury in consultation with the SARB. Documentation should be disclosed that specifies the respective responsibilities of each institution in this process and in setting the inflation target. - 5. Take further steps to improve monetary policy transparency by providing more information on dissenting votes in MPC deliberations, including alternative risk scenarios in the MPR, and clarifying the ownership of various communication vehicles. - 6. Enhance the transparency of the SARB’s foreign exchange (FX) reserve management by disclosing key, underlying considerations or non-market sensitive components of the annual Investment Guideline. In addition, transparency in the implementation of the GFECRA framework would greatly benefit from the disclosure of detailed (not market sensitive) information on the calculation of the level of adequate foreign exchange reserves and related updates, as the need arises. - 7. Disclose financial stability decisions in a timely manner via statements and press releases, and publish information on the activities of interagency committees, including tasks and outcomes for each meeting, while keeping sensitive information confidential. - 8. Proactively disclose information on the SARB’s AML/CFT supervisory policies and resources—and on the remedial actions taken by supervised institutions. - 9. Make readily available to the public general information on the SARB’s internal AML/CFT control function by establishing a dedicated webpage that summarizes its activities and outcomes and provides a link to information on the relevant audit procedures. - 10. Ensure the transparency of the SARB’s interactions with the government in a structured and regular manner, including with respect to services provided, respective responsibilities, and documents concerning cooperation and coordination. ### Scope and objective (summary) - The mission conducted a Central Bank Transparency Code review at the SARB’s request. - Scope covers all CBT principles except: - those not performed by the SARB (i.e., consumer protection); - those outside CBT review scope due to established international standards (i.e., microprudential supervision and resolution, and Financial Markets Infrastructure), denoted “Not Applicable”. - FX administration: the government has the mandate for formulating FX administration policies but delegates certain powers and functions to the SARB; transparency of exchange control policies reviewed under Pillar V; operations and outcomes covered under Pillars III and IV. - Where SARB has not conducted operations for some time (i.e., Bilateral Liquidity Support and FX management), related sub-principles on operations and outcomes are denoted as “Not Applicable”. - The CBT review scope extends only to the central bank, not to other public sector institutions; transparency enhancements under Pillar V may depend on partnering institutions. - Purpose: allow the SARB to evaluate transparency practices, identify strengths and areas for improvement, and help strengthen dialogue with stakeholders and balance independence with accountability. *Source: 1zafea2024002-print-pdf - EXECUTIVE SUMMARY* ### 13. The mission’s approach consisted of a desk review as well as in-depth discussions with ### 13. The mission’s approach consisted of a desk review as well as in-depth discussions with ### Mission approach and stakeholder engagement - The mission combined a preliminary desk review and in-depth discussions with the SARB and key stakeholders. - The desk review drew on publicly available information and the Self-Review questionnaire responses provided by the SARB prior to the mission. - The mission conducted almost forty meetings (in both hybrid and virtual format) over two weeks. - Meetings included SARB management and staff, and key stakeholders from the public and private sector, including academia, think tanks, and journalists; meetings with key stakeholders were planned in coordination with the central bank, though the SARB’s staff did not attend those stakeholder meetings. - The mission took place from May 13–27, 2024. - The mission team expressed appreciation for the high quality of cooperation, including responses to the self-review questionnaire, documentation, technical support, and facilitation of the meeting schedule. ### Review methodology - The review was conducted principle-by-principle, mapping the SARB’s transparency practices across practices defined by the CBT and considering the SARB’s legal mandate, policy context, and prevailing general legal framework. - Important dimensions of transparency considered: - (i) timeliness; - (ii) periodicity; - (iii) quality of disclosure (covering accessibility and ease of understanding, especially by the general public). - The review also incorporated views expressed by SARB stakeholders. ### Macroeconomic background and priorities - Growth decelerated to 0.7 percent in 2023 (from 1.9 percent in 2022) on account of a severe energy crisis and logistical bottlenecks. - Headline inflation has returned but has remained within the SARB target range (3–6 percent) since mid-2023. - Near-term policy priorities identified: - ensuring fiscal sustainability; - safeguarding macro-financial stability in the volatile global environment; - resolving the ongoing energy crisis; - initiating far-reaching reforms to lift potential growth, create jobs, and reduce poverty and inequality. - Binding constraints and risks noted: limited fiscal space, long-standing rigidities in product and labor markets, governance and corruption vulnerabilities, rising policy uncertainty, and an unfavorable external environment. ### Financial sector resilience and supervisory context - The financial sector remained resilient to COVID-19 and recent global financial market volatility, supported by strong capital and liquidity buffers and prudent supervision. - The 2021 Financial Sector Assessment Program (FSAP) highlighted challenges including an intensified financial sector-sovereign nexus, gaps in regulation and supervision, and the grey listing of South Africa by the Financial Action Task Force (FATF). - Authorities have implemented several FSAP recommendations to enhance supervisory and resolution frameworks. - Strengthening the AML/CFT framework is a top priority to achieve removal from the FATF’s grey list. - The SARB has four wholly-owned subsidiaries: the South African Mint Company, the South African Bank Note Company, the Corporation for Public Deposits (CPD), and the Corporation for Deposit Insurance (CODI). ### SARB governance and institutional arrangements - Constitutional and statutory mandates: - The Constitution mandates the SARB to pursue and maintain price stability in the interest of balanced and sustainable economic growth and enshrines institutional autonomy. - The Financial Sector Regulation Act (FSR Act) of 2017 gave the SARB an explicit statutory mandate to protect and enhance financial stability. - Governance structure: - The SARB is overseen by a majority non-executive Board comprising the Governor (chair), three Deputy Governors, and eleven non-executive directors. - Policy-making and executive management are responsibilities of the Governor and Deputy Governors, who make decisions collectively. - The SARB has about 800 private shareholders who consider the annual audited financial statements and elect seven non-executive directors, but they have no influence over policy matters. - The President of the Republic of South Africa appoints four other non-executive directors. - Recent governance developments: - Recent extension of the Governor’s and one Deputy Governor’s terms for another five years, and appointment of a new Deputy Governor, eliminated the risk of a power vacuum and was perceived positively by the markets. - Safeguards and governance practices: - The 2022 safeguards assessment found strong safeguards in most areas, including governance and oversight, audit, and financial reporting; most recommendations have since been implemented. - The SARB has developed an approach to corporate governance aligned with the King Report on Corporate Governance in South Africa (2016), as disclosed on its website. ### Monetary policy framework and implementation - The SARB implements an inflation targeting framework established in 2000 and associated with a floating exchange rate arrangement. - The inflation target band is three to six percent, set by the government in consultation with the SARB; the SARB enjoys operational autonomy to implement monetary policy to achieve that target. - Authorities are discussing replacement of the target band with a (lower) point target and a narrow tolerance band. - The monetary policy stance is communicated via the SARB short-term policy rate and implemented using an interest rate corridor. - The SARB recently introduced a new monetary policy implementation framework based on a tiered floor system; this framework was clearly communicated to markets. - Interest rate decisions are made by the Monetary Policy Committee (MPC), which meets six times a year and currently consists of six members (the SARB Governor, three Deputy Governors, and two senior SARB officials). ### Macroprudential role and financial stability framework - The SARB has a critical role in macroprudential policy; the Governor is the key decision-maker, backed by internal and external advisory committees. - The FSR Act established a strong mandate for the SARB to protect and enhance financial stability and to restore financial stability in an adverse systemic shock. - Multiple macroprudential authorities exist in South Africa, with the SARB playing a leading role. - External advisory committees established by the FSR Act: - Financial Stability Oversight Committee (FSOC); - Financial Sector Contingency Forum (FSCF). - Internal committee: Financial Stability Committee (FSC). - Financial Stability Review (FSR), published twice a year, is a key SARB instrument to monitor global and domestic environments and identify risks and vulnerabilities. - The SARB recommends macroprudential and microprudential policy actions and conducts banking sector stress tests. ### Strategy, reputation, and policy record - The SARB’s policies and actions are governed by its five-year strategy; the 2025 Strategic Plan is designed to fulfill price and financial stability mandates and is articulated via five Strategic Focus Areas. - Enablement Focus Areas supporting strategic objectives include external stakeholder engagement, promoting economic research, optimizing information and technology solutions, enhancing operational efficiency, and attracting, developing, and retaining core skills and competences. - The SARB is working on a new five-year strategic plan and considers this CBT review as a critical input into the process. - The SARB is considered one of the most reputable public institutions in South Africa, with a strong policy record: - Massive and swift intervention in the bond market in March 2020 helped calm markets and restore functioning. - In the post-pandemic period, the SARB promptly raised interest rates to arrest inflation acceleration and introduced a new monetary policy implementation framework following shifts in structural liquidity. - The SARB actively engages a wide range of stakeholders to explain its policies and promote work on emerging topics such as fintech. ### Public engagement and social initiatives (Box 1) - The SARB employs multiple communication vehicles and initiatives to reach varied audiences: - Monetary Policy Forum (MPFs): convened twice a year across provinces to explain monetary policy; Governor and MPC present the Monetary Policy Review (MPR). - Financial Stability Forum (FSF): biannual presentation of the Financial Stability Review by the Governor and senior management. - Economic Roundtable: quarterly debates chaired by the Governor with academics, market participants, and industry experts. - Public Outreach Program: engagements across nine provinces targeting high school students, teachers, tertiary institutions, labor movement, interest groups, rural and urban communities, and NGOs. - MPC School Challenge: annual competition now in its 12th year, involving more than 400 schools and thousands of students; teams submit essays in the format of the SARB’s bimonthly Monetary Policy Statement (MPS). - University Chairs Program: partnerships with four tertiary institutions to develop research and support Master’s and PhD students focusing on monetary policy, financial stability, and economic journalism. - Social media and unconventional outreach: - Increased presence on Twitter, LinkedIn, and Facebook using videos, infographics, and explainers; experimented with video broadcasts by the Governor in official languages other than English. - Investor and private-sector engagements: - The private sector commended the SARB for open and transparent dialogue and accessibility of management. - Concern noted: important policy messages (e.g., arguments behind dissenting votes during MPC meetings) revealed in such meetings might not be universally accessible to those not present. ### Fintech activity and innovation (Box 2) - Context: - South Africa has an advanced financial services and banking industry, widespread digital payments, and high financial inclusion relative to other developing economies. - The SARB focuses on harnessing fintech to enhance safe, seamless, convenient, affordable, and rapid digital payments. - SARB Fintech Unit: - Established in 2017 to leverage fintech innovations while maintaining oversight; focus areas include policy and regulatory implications, data collection and analysis, and creating an enabling environment. - Intergovernmental Fintech Working Group (IFWG) Innovation Hub: - IFWG established in 2016; members include the SARB, Competition Commission, Financial Intelligence Centre (FIC), Financial Sector Conduct Authority (FSCA), National Credit Regulator, NT, Prudential Authority, and South African Revenue Service. - IFWG oversees a regulatory sandbox for supervised testing of innovations with a six-month testing period, after which insights are shared. - Key fintech initiatives: - Project Khokha (PK): DLT experiment for interbank wholesale settlement using the real-time gross settlement system; considered a successful DLT-based wholesale payment system proof-of-concept. - Project Khokha 2 (PK2): proof of concept exploring tokenization policy and regulatory implications; issued, cleared, and settled debentures on DLT using tokenized money; experimented with two forms of tokenized money including a tokenized form of central bank money (wholesale CBDC) and commercial bank-issued stablecoin for secondary market settlement. - Project Dunbar: multi-central bank collaboration with BIS Innovation Hub Singapore Centre, Reserve Bank of Australia, Bank Negara Malaysia, and MAS to explore an m-CBDC for cross-border payments, addressing access, jurisdictional boundaries, and governance. - CBDC exploration: SARB is exploring a retail CBDC to complement cash; potential benefits include payments modernization and reduced costs of maintaining physical cash, while downside risks are significant and thus... *Source: IMF staff mission report and SARB-provided materials.* ### Box 2. South Africa: Fintech Activity (concluded) ### Box 2. South Africa: Fintech Activity (concluded) ### Central Bank Digital Currency (CBDC) feasibility and design principles - The feasibility study remains in progress as of June 2024. - Key design principles required that the digital currency must: - be available and usable by everyone in the South African economy; - be a generally accepted medium of exchange; and - its value shall be pegged at a one-to-one parity with the rand. ### Gold and Foreign Exchange Contingency Reserve Account (GFECRA): background and drivers - The SARB holds gold as part of its foreign reserves; recording and measurement established in Section 25 of the SARB Act. - Provisions stipulate that all gains or losses on that gold are for the account of the South African (SA) government. - Foreign exchange and forward exchange contract profits or losses of the SARB are for the account of the government (Sections 26 and 27). - All the revaluation gains or losses from these accounts are transferred to the GFECRA, which helps maintain the SARB’s financial autonomy as a buffer for risks from FX and gold price fluctuations. - The GFECRA balance ballooned from R1.8 billion in March 2006 to R507 billion in January 2024 (7 percent of GDP), driven in large part by the depreciation of the rand against the US dollar. - This balance, comprising unrealized valuation gains, represents a liability of the SARB to the NT. ### New framework, proposed transfers, and mechanics - In February 2024, the government announced plans to tap part of the gains to reduce government borrowing. - The SARB and NT have agreed to distribute about half of the GFECRA (i.e., R250 billion will be distributed and the rest will remain in the GFECRA account). - Allocation of the R250 billion: - SARB’s Contingency Reserve: R100 billion (to boost equity and cope with sterilization costs of the operation). - The remainder to the NT, to be executed in tranches over three years: - 2024: R100 billion; - 2025: R25 billion; - 2026: R25 billion. - The proposed transfer of gains will be a first-time operation; a new, rules-based framework (updated Memorandum of Agreement) is being developed by the SARB and the NT to govern distribution going forward. - Key technical challenges identified: - Establishing a proper methodology to calculate the optimal size of the SARB’s Contingency Reserve, since future transfers can only be made once the target is achieved. - Developing a methodology to calculate which part of unrealized gains can be deemed realized before distribution. - SARB’s stated approach to realize gains: - Neither foreign exchange nor gold will be sold to realize the gains. - SARB will monetize the unrealized gains by replacing on its balance sheet the portion of the unremunerated GFECRA liability to NT with new liabilities to commercial banks (excess reserves remunerated at the repo rate). ### Legal and procedural considerations - Transfers to and from the GFECRA can only be effected by enacting the Appropriations Bill. - An Appropriations Bill is awaiting signature by the President of the Republic of South Africa (as of May 2024). - The NT has settled losses in the GFECRA in previous years under the 2006 agreement (example: the GFECRA Defrayal Act (2003) when NT paid approximately R28 billion to the SARB). - SARB subsequently published in June 2024 the Gold and Foreign Exchange Contingency Reserve Account Defrayal Amendment Act. ### Coordination, stakeholder communication, and transparency issues - External stakeholders informed the IMF mission that communications could be improved on the respective roles of the SARB and the NT in the GFECRA. - Following the announcement of the transfer during the FY24/25 Budget process, the public raised numerous questions, leading to the issuance by the SARB and NT of a joint “GFECRA Q & A” published on their respective websites. - Given the complexity, impact on monetary policy operations, and long-term nature of the reform, a measured approach is being implemented that considers confidentiality on market-sensitive aspects. - Additional tailored forums to engage the public and stakeholders would be beneficial even amid uncertainty regarding timing. ### Proposed communication strategy (policy recommendations) - Establish a communication strategy for the transition plan, including timelines, given the anticipated impact on the money market. - Establish a dedicated page on the SARB website and reach out to relevant stakeholders through seminars and workshops. - Publish the new framework (or its components) once finalized and appropriately sanitized for possible market-moving and sensitive information. - Consider explicitly mentioning the methodologies for assessing the Contingency Reserve and the adequacy of FX reserves. - Report on the monthly movement in the GFECRA balance during the transition period; note that the GFECRA balance is currently rolled up into “Other Liabilities” in the Monthly Statement of Assets and Liabilities, which masks the actual balance. ### Main findings: transparency, governance, and risk management - Legal structure, mandate, and decision-making: - Information on the SARB’s overall legal structure is publicly available, but information on certain key components of its legal status and protections is not easily accessible. - The SARB website contains core legislation but no dedicated section for other instruments (regulations and directives) or accessible explanations for the general public on legal protections and judicial review of SARB actions. - The SARB’s objectives (price and financial stability) are disclosed, but transparency of its mandate could be enhanced, including clearer explanations of differing levels of autonomy across objectives and the legal foundation of functions and powers. - The SARB does not provide an explanation of the supremacy of the Constitution or how its provisions relate to the role of the Minister under the SARB Act or the relationship between the SARB and the Minister. - Information on safeguards for security of tenure, protections for decision-making bodies and employees, investments, financial commitments, guarantees, and the rationale for financial autonomy is not explained in lay terms. - Risk management and accountability: - The SARB’s risk management function is well developed and aligned with leading practices; it discloses a comprehensive risk management framework, uses ISO 31000, and incorporates King IV™ principles with a Combined Assurance Model. - Transparency could be enhanced by publishing the risk management framework and a brief risk statement mapping risks to the SARB’s mandate and key developments related to major risks. - Oversight arrangements are commendable: a Board Audit Committee (BAC) with disclosed composition and biographies; the Audit Committee publishes a comprehensive Audit Committee Report. - The SARB publishes independently audited financial statements and applies IFRS for transactions other than gold and FX (the SARB Act establishes accounting treatment for gold and FX transactions). - Internal audit information could be enhanced by dedicating a section to the Internal Audit Department (IAD) and publishing the Internal Audit Charter. - Ethics, whistleblowing, and human capital: - The SARB has an Ethics Policy, Board members’ TOR, and a Whistleblowing Policy operationalized via a public hotline administered by an independent external party available 24/7 in a few official languages. - The SARB could publish aggregated information on investigations and actions taken under these policies and publish a publicly available version of the Ethics Policy. - Transparency in human capital management is exemplary: the Annual Report provides detailed statistics on headcount, racial makeup, gender, age, years of service, and other diversity indicators, along with staff development, recruitment, retention, retirements, awards, and Employee Engagement Survey outcomes. - Communications and confidentiality: - The SARB actively engages external stakeholders via multiple channels but should reveal general details of its communication framework and improve information accessibility. - Institutional messages are scattered across many tools and channels; the SARB would benefit from a robust, holistic, and proactive communications approach, strengthening the communications unit and effectively managing key messages and tools, particularly for specific communication challenges (for example the discussions around GFECRA or changing the inflation target). *Sources: Digital Payments Roadmap: Towards inclusive, accessible, effective and sustainable digital payments in South Africa (April 2024); South African Reserve Bank. 2023 Annual Report; SARB CBDC FAQ's (September 2021); Bank for International Settlements (BIS) Innovation Hub; South Africa Intergovernmental Fintech Working Group (IFWG) Innovation Hub; 2024 Budget Review (Presented to Parliament on February 21, 2024); Updated Gold and Foreign Exchange Contingency Reserve Account Q and A (February 21, 2024); Remarks by Mr Rashad Cassim, Deputy Governor of the South African Reserve Bank, at the Annual Financial Markets Cocktail Function, Sandton, Johannesburg, March 6, 2024; SARB MPC Press Conference, March 27, 2024; Gold and Foreign Exchange Contingency Reserve Account Defrayal Act, 2003.* ### 33. The SARB’s confidentiality practices are supported by a solid legal framework and are ### 1zafea2024002-print-pdf - 33. The SARB’s confidentiality practices are supported by a solid legal framework and are ### Confidentiality framework and practices - Findings: - The SARB Act protects confidential information and states that no person shall disclose any information contained in any written communication marked as confidential or secret. - The Act recognizes limitations on the right of access to information, including limitations aimed at reasonable protection of privacy and of personal information in a manner that balances that right with the transparency objective. - The SARB has internal policies and procedures classifying information as top secret, secret, confidential, restricted, etc. - Recommendations / opportunities for enhanced transparency: - Consider publishing the SARB’s internal confidentiality framework. - Consider disclosing whether the SARB actively sought stakeholder input on its confidentiality policy. - Consider publishing information on possible legal disputes surrounding its policy on confidentiality and secrecy. - Improve website search and sign-up functions (noted as warranting substantial improvement). ### Monetary policy: framework, communication, and transparency gaps - Findings: - The SARB’s monetary policy framework is effectively disclosed: objective (low and steady inflation), instrument (repurchase (repo) rate), and strategy. - The current inflation target was established in 2000 as a three to six percent range; in 2017 the SARB clarified the target by setting the point target at 4.5 percent. - The process for setting the inflation target by the National Treasury (NT), in consultation with the SARB, is opaque and not well understood by external stakeholders. - Recent discussions about lowering the target raised questions about how such a change could be achieved given the lack of clarity on the target-setting process. - The SARB issues six monetary policy decisions per year, each accompanied by a detailed Monetary Policy Statement (MPS) reporting votes, a press conference, and a next-day market analysts briefing. - The SARB publishes a semiannual Monetary Policy Review (MPR) with extensive analysis and model-based forecasts; the Governor appears before Parliament twice a year on monetary policy. - MPSs and MPRs contain complete economic projections including assumptions and forecasts of inflation, output, the repo policy rate, and the exchange rate. - The SARB shortened and simplified statement language, uses social media, and conducts Monetary Policy Forums; it conducts ex-post evaluations of inflation and output forecasts but does not systematically conduct transparent post-mortems of its monetary policy framework and implementation. - Transparency gaps and recommendations: - Provide more information on dissenting votes in Monetary Policy Committee (MPC) deliberations (no explanation for dissenting votes is currently provided in the MPS). - Include alternative risk scenarios in the MPR to communicate uncertainty around the central projection and illustrate the SARB’s reaction function. - Clarify ownership and accountability for monetary publications and forecasts: MPSs are released by the Governor’s office (not the MPC), and MPRs lack a preface confirming MPC ownership and accountability. - Consider providing dissent explanations non-attributed within the MPS or in a separate document. ### New Monetary Policy Implementation Framework (Box 4) - Background and rationale: - Structural liquidity surpluses impaired transmission under the prior shortage (deficit-reserve) system; overnight interest rates deviated from the repo rate and FX-implied interest rates were very volatile. - The SARB analyzed other central banks and developed a proposal for a new “tiered floor” surplus-reserve framework. - Key dates and papers: - Consultation paper issued in November 2021. - Two papers released in May 2022: an explanation of the new framework and the SARB’s plan for transition. - Implementation began on June 8, 2022, and completed over a 12-week period through August 24, 2022. - Transition metrics: - Excess reserves were raised from a shortage of around R30 billion at the start of the transition to a surplus of R50 billion at the end. - Quotas for banks were derived from the SARB’s overall liquidity target augmented with a buffer and allocated based on the size of bank liabilities. - Outcomes: - Almost 30 banks participate in the new tiered-floor surplus-reserve system. - The system improved transmission: most overnight rates remained close to the repo rate. - Use of weekly repo auctions and standing deposit and lending facilities (at 100 bps below and above the repo rate, respectively) declined relative to the prior system. - Liquidity management migrated from the original unsecured platform to a new secured interbank market, strengthening efficiency and resilience and giving the SARB flexibility to provide liquidity in severe stress. ### Cross-Border financial flows and foreign exchange administration - Findings: - The SARB communicates implementation of the NT’s exchange control policy to authorized dealers and facilitates public understanding via a dedicated website section (legal context, SARB regulations, FAQs, online systems for ADs and ADLAs). - Recommendations: - Disclose non-market sensitive information on results of policy implementation (e.g., in the Annual Report). - Disclose thematic outcomes of policy implementation: areas leading to SARB interpretations in response to ADs’ and ADLAs’ queries, key supervisory outcomes, and related sanctions. - Disclose actions taken by the SARB to discharge its advisory function to the NT on policy framework design. ### Foreign exchange management and reserve management - Findings: - South Africa operates a flexible market-based exchange rate; the SARB generally abstains from active FX interventions but may intervene to accumulate reserves, smooth large transactions, or restore market liquidity and functioning under disorderly conditions. - The SARB’s transparency on FX reserve management is high; core elements disclosed on the SARB website, including the Investment Policy document and a SARB Factsheet. - Annual audited financial statements provide composition of FX reserves and key drivers of returns and the impact on the Bank’s financial position. - Recommendations: - Elaborate and disclose further the framework and circumstances for FX interventions to give stakeholders clearer guidance. - Disclose non-market sensitive components of the internal investment guideline or key macrofinancial features bearing on guideline design (e.g., adequacy and liquidity parameters) and inputs provided by the NT in periodic updates. - For FX reserve adequacy under the GFECRA framework, disclose detailed (not market sensitive) information on the calculation of adequate FX reserves and updates as needed. - Increase frequency of publication of the currency composition of official FX reserves (currently published annually). ### Financial stability, macroprudential policy, and stress testing - Findings: - The SARB discloses its financial stability policy framework, objectives, strategy, instruments, and underlying conceptual framework. - The SARB’s macroprudential framework is available on its website; an internal non-statutory Financial Stability Committee formulates policy and facilitates intra-bank cooperation. - Two statutory interagency bodies (the FSOC and the FSCF) support the SARB; public information on the FSC, FSOC, and FSCF activities is limited. - The SARB publishes a semiannual Financial Stability Review (FSR) and conducts comprehensive risk assessments and semiannual stress tests, disclosing methods and underlying data. - Recommendations: - Disclose information on the Financial Stability Committee (FSC) and provide more detailed information on tasks and outcomes of FSOC and FSCF meetings and consultations with other authorities, while keeping sensitive information confidential. - Publish decisions on macroprudential measures more expeditiously rather than waiting for the FSR. - Strengthen transparency by publishing ex post evaluations of whether implemented measures achieved intended effects. ### Emergency Liquidity Assistance (ELA) and LOLR function - Findings: - SARB disclosures of its ELA framework have been greatly enhanced recently; communications during the COVID-19 pandemic were timely and proactive. - In response to IMF recommendations from the 2012 FSAP, the SARB has worked on legal underpinnings of its Lender of Last Resort (LOLR) function, including publishing a draft Discussion Paper for consultation on a repo facility to assist non-bank financial institutions. - In 2022 the SARB published a Position Paper on the provision of ELA for banks addressing criteria, legal requirements, and collateral rules. - The Position Paper indicates ELA disclosure is at the SARB’s discretion to protect bank viability or financial stability. - Recommendation: - If a framework for handling systemic market dysfunction is developed, consider disclosing that framework to benefit market participants. *Source: Excerpt from IMF country report chapter on South Africa (SARB transparency and policies).* ### 44. The SARB is generally transparent with respect to its AML/CFT supervisory powers, ### 1zafea2024002-print-pdf - 44. The SARB is generally transparent with respect to its AML/CFT supervisory powers, ### AML/CFT supervisory transparency (paragraphs 44–46) - The PA (Prudential Authority) is responsible for AML/CFT supervision for banks, life insurers, and clearing system participants; FinSurv (Financial Surveillance Department) supervises Authorised Dealers in foreign exchange with limited authority. (footnote 14) - Both PA and FinSurv: - Provide basic information on inspection and enforcement powers. - Disclose the number—but not the type, scope, or reach—of inspections conducted/inspection reports completed each year. - Regularly publish extensive guidelines for supervised institutions and detailed information on violations found and administrative sanctions imposed. - PA is more proactive in certain aspects of disclosure; PA maintains an AML/CFT-dedicated webpage with completed risk assessments for the banking and life insurance sectors. - Non-sensitive supervisory information is not proactively disclosed: - PA and FinSurv maintain detailed, non-sensitive information on supervisory resources and activities, risk-based approach implementation, and remedial actions taken by supervised institutions; this information has been disclosed only to international bodies (IMF, FATF). - Both supervisors have comprehensive AML/CFT supervisory policies that could be summarized in a “sanitized” form and posted online but have not yet done so. - Internal SARB AML/CFT control function transparency: - The SARB’s AML/CFT Team is within the Compliance Management Division (CMD) of the RMCD. - Activities are tracked internally, included in an Annual Compliance Report, and audited by the Internal Audit Department; findings and recommendations are presented to the Board. - No information on the internal AML/CFT control function or its periodic audits is posted on the SARB’s website or otherwise made readily available to the public. ### Pillar V — Transparency in official relations (paragraphs 47–49) - Relationship with the government: - Legal framework (Constitution and SARB Act) contains mechanisms for SARB–government interaction, mentioning roles such as advising on the economy, managing FX reserves, acting as a fiscal agent, coordinating financial stability issues, and institutionalizing reporting requirements. - Disclosure of financial transactions with the government appears in the SARB’s annual financial statements. - SARB and National Treasury (NT) have well-established relations guided by a non-published Memorandum of Understanding (MOU) determining terms and conditions of engagement, including joint standing committees. - During COVID-19, live press conferences and statements explained anti-crisis measures taken in collaboration with the government. - Recommendation: SARB is advised to reveal interaction with the government in a structured and regular manner (services provided, respective responsibilities, and documents concerning cooperation and coordination) and to disclose modalities and instruments used to interact with the government through press releases and statements; could set up a dedicated webpage. (footnote 15) - Relationship with domestic financial agencies: - Modalities of interaction described in legislation including the FSR Act; committees and working groups established. - MOUs between SARB and other financial sector regulators are public (per FSR Act) but not easily accessible via the SARB’s website. - Recommendation: Enhance transparency by providing more details (subject to market sensitivity and confidentiality) on deliberations of FSOC and FSCF. - SARB discloses involvement with private and public institutions, including investments in and ownership of financial private sector subsidiaries. - International cooperation: - SARB is active in international committees and forums, plays a crucial regional role in Eastern and Southern Africa. - Website contains detailed information on interaction with foreign institutions. - Recommendation: Further disclosure/publication of international, regional, and bilateral agreements with foreign central banks would improve transparency. ### Authorities’ response and engagement (pages 32–37) - CBT Review engagement timeline and stakeholders: - Process commenced with pre-mission engagements in March 2024. - Main in-person mission took place between 15 to 22 May 2024. - Consultations with internal SARB departments and external stakeholders (market participants, journalists, parliament, academics). - Overall assessment and SARB stance: - IMF assesses SARB’s transparency benchmark as high and broadly aligned with expanded and comprehensive practices as defined by the IMF CBT. - SARB welcomes the report, accepts recommendations, and commits to further enhancements while noting areas of divergence that are explained. - SARB committed to enhancing transparency and making information more easily accessible. ### SARB responses to key IMF recommendations (numbered 1–8) 1. Strengthen transparency of legal structure and autonomy: - SARB noted suggestion and is happy to consider inclusion in relevant transparency mechanisms. - SARB published a list of GFECRA documents, including the GFECRA Defrayal Amendment Act 2024; the signed agreement between SARB and National Treasury; and a GFECRA Q&A. 2. Disclose additional information on risk management, internal audit, and Ethics Policy: - SARB provides detailed updates on strategic delivery and risk factors in its Annual Report. - Will consider publishing relevant extracts or a summary of the Ethics Policy on its website. 3. Streamline communications and improve website accessibility: - SARB describes a proactive, multipronged communications approach tailored for different audiences; publications are accompanied by engagements, livestreams, and recordings. - In the last five years, SARB redesigned its website for greater access and enhanced functionality; SARB welcomes further enhancements. 4. Clarify process of reviewing monetary policy framework and inflation target setting: - SARB and National Treasury relations guided by an MOU; decisions on disclosure of specific documentation (including the MOU) would need joint decisions by both institutions. 5. Improve monetary policy transparency (dissenting votes, alternative scenarios, ownership of communication vehicles): - SARB has increased transparency via new communications vehicles and model-based forecasts. - SARB considers current practice of disclosing preferences of MPC members appropriate; will consider strengthening risk assessment and providing more detail across platforms. - Scenario modelling is integral to MPC process; scenarios are expressed in MPC statements, MPR, and investor discussions. 6. Enhance FX reserve management transparency: - SARB already publishes the investment policy of official gold and foreign exchange reserves. - SARB could consider publishing methods for calculating the optimal and adequate level of reserves; has published the GFECRA agreement and committed to an annual review of GFECRA buffers with updates. 7. Disclose financial stability decisions and interagency committee activities: - SARB publishes financial stability decisions and interagency committee activities in the FSR twice a year and communicates in the bi-annual Financial Stability Forum. - SARB considered but decided against issuing a press release after each FSC meeting for practical reasons; will communicate as required by circumstances. - SARB currently communicates involvement in interagency committees in its Annual Report while maintaining confidentiality. 8. Proactively disclose AML/CFT supervisory policies, resources, and remedial actions: - SARB welcomes the recommendation and considers strengthening the AML/CFT framework necessary and crucial; agrees such efforts would assist South Africa in the FATF process. *Source: INTERNATIONAL MONETARY FUND (excerpts from provided content).* ### 9. Make readily available to ### 9–10. Public availability and transparency of SARB AML/CFT controls and government interactions ### Public information on the SARB’s internal AML/CFT control function - Recommendation: - Make readily available to the public general information on the SARB’s internal AML/CFT control function by establishing a dedicated webpage that summarizes its activities and outcomes and provides a link to information on the relevant audit procedures. - Findings: - The SARB maintains a repository of information and data related to its internal AML/CFT control function. - There is merit and scope to provide some of this information publicly, where it is not confidential. ### Transparency of the SARB’s interactions with government - Recommendation: - Ensure the transparency of the SARB’s interactions with the government in a structured and regular manner, including with respect to services provided, respective responsibilities, and documents concerning cooperation and coordination. - Legal and institutional context: - The Constitution and SARB Act provide a legal framework that contains a clear mechanism for the SARB’s interactions with National Treasury. - The SARB and Government (National Treasury) also have an MoU that guides their interactions. - Current public information and governance disclosures: - The relationship between the President and Minister of Finance and the SARB is defined across various sections of its website. - For example, the President appoints governors, deputy governors and members of the board, as explained in the section about governance. - The website also explains the SARB’s policy independence, its regular engagements with the Minister of Finance and the parliamentary portfolio committees on finance – explaining the SARB’s ultimate accountability to Parliament. - SARB’s position on greater transparency: - The SARB acknowledges the value in providing, where possible, more detailed information regarding its relationship with government; this would have to be done in consultation with National Treasury to ensure alignment and best practice. *Source: 1zafea2024002-print-pdf - 9. Make readily available to the public general information on the SARB’s internal AML/CFT control function* ### Annex I. South African Reserve Bank: Central Bank ### Annex I. South African Reserve Bank: Central Bank Transparency Code—Detailed Review ### Pillar I — Central Bank Governance: Legal Structure (Principle 1.1) - Description - The SARB discloses its legal framework via the SARB website and Annual Report (2022-2023): Constitution of the Republic of South Africa 1996 (Constitution) and South African Reserve Bank Act 90 of 1989 (SARB Act). - Constitution establishes: (i) the SARB as the central bank of the Republic, regulated by an Act of Parliament; (ii) the SARB’s primary object; and (iii) its institutional autonomy. - Updated version of the SARB Act is available on the SARB website. - SARB Act sets out the SARB’s mandate; SARB website lists core legislation relevant to mandate (financial institutions, national payment system) with links. - SARB is subject to Promotion of Access to Information Act 2 of 2000 (PAIA), which takes precedence over confidentiality provisions in the SARB Act; PAIA compels disclosure on request subject to exceptions (e.g., deliberative process, policy success). This PAIA precedence is not disclosed on the SARB website or Annual Report. - SARB clarified: constitutional provisions relating to the SARB would prevail in event of conflict; usual statutory interpretation rules apply where SARB Act as specific law prevails over a general law. - SARB Act provides deemed continuation of Governor, Deputy Governor and Board members appointed under previous Act for unexpired terms; prior rules on shares deemed made under corresponding provisions. - SARB discloses plans to review legal framework (Annual Report): consequential amendments to National Payment System Act 78 of 1998 proposed; National Treasury and SARB engaged stakeholders; SARB, National Treasury and Financial Sector Conduct Authority drafting amendments to Financial Markets Act 19 of 2012. - Legislative process requires public consultation via Standing Committee on Finance of the National Assembly before SARB-related law amendments. - Legal Nature & Instruments - SARB Act defines SARB as a juristic person with private shareholders since establishment; defines shareholder and limits on share holdings and liability. - General meeting powers limited to considering annual financial statements, electing seven non-executive directors, appointing external auditors and approving remuneration. - SARB must transmit list of shareholders and shares to National Treasury for tabling in Parliament. - Annual Report discloses shareholders and dividends paid; SARB Act Regulations set procedures for registration and transfer of shares. - SARB discloses regulations, directives and notices on website but no single dedicated page for legal instruments. - Legal Protection - Extent of judicial review and protection from pre-judgment attachments not clarified in SARB Act. - Banks Act 94 of 1990 excludes liability of SARB or its decision-making bodies/employees for loss or damage in bona fide performance under that Act. - Financial Sector Regulation Act 9 of 2017 (FSR Act) protects SARB from liability for decisions/actions under a financial sector law; provides that aggrieved parties against Financial Review Tribunal orders may institute judicial review under Promotion of Administrative Justice Act. - SARB clarified it has no special protection and is subject to normal administrative law under Promotion of Administrative Justice Act 3 of 2000 unless specific financial sector laws exempt actions; no special protection from prejudgment attachments. - SARB Act: SARB shall not be placed in liquidation except by an Act of Parliament; no writ of execution or attachment if Minister intends to introduce Bill to place SARB in liquidation. - Review Core Findings - Legal framework and links are available but SARB Act unclear on which law prevails in conflicts with other laws. - Legal nature and ownership defined; ownership structure and shareholding limit disclosed. - Lack of a dedicated website section for regulations, directives and notices makes legal instruments hard to find. - Scope of judicial review and legal protection not adequately explained on website or in Annual Report. - Comments / Recommendations - Explain on SARB website in accessible terms: - (i) whether SARB Act prevails in event of conflict with other laws; - (ii) SARB’s disclosure obligations under PAIA; - (iii) extent of judicial review over SARB activities; - (iv) scope of legal protection afforded to SARB in carrying out functions; - (v) legislative review process including stakeholder engagement. - Create a dedicated website page for regulations, directives and notices and a consolidated list of legal instruments issued to date. ### Pillar I — Central Bank Governance: Mandate (Principle 1.2) - Description — Objectives - Constitution (Article 224) sets SARB’s primary object: protecting the value of the currency in the interest of balanced and sustainable economic growth. - SARB Act repeats primary objective and provides SARB is responsible for protecting and maintaining financial stability as envisaged in the FSR Act. - SARB website and Annual Report (2022/23) explain primary and statutory mandates. - Monetary Policy Review of April 2024: overseeing and maintaining financial stability is a complementary mandate; SARB clarified financial stability mandate is an additional mandate to price stability and not a secondary mandate. - Mission statement on website explains link between price stability and financial stability. - Price stability implies maintaining inflation within target range set by Government; selection of monetary policy goal is Government responsibility. - Inflation target range of 3 to 6 per cent agreed between SARB and Ministry of Finance via exchange of letters. - Description — Functions - Constitution (Article 225) states powers and functions are those customarily exercised by central banks and determined by Act of Parliament. - SARB Act lists “powers and duties” including: (i) issue banknotes and coins; (ii) regulate and supervise payment, clearing and settlement systems; (iii) perform central bank functions of bankers and financial agents; (iv) perform functions assigned under Banks Act, Mutual Banks Act No. 124 of 1993, FSRA and other financial sector laws as defined in FSR Act. - Prudential Authority established under FSR Act as a juristic person operating within SARB administration; Annual Report highlights Prudential Authority role in protecting/enhancing financial stability. - SARB website lists responsibilities: (i) issuing/destroying banknotes and coin; (ii) regulating/supervising financial institutions; (iii) managing official gold and foreign reserves; (iv) managing national payments system; (v) administering remaining exchange rate control systems; (vi) acting as banker to Government; (vii) acting as lender of last resort in exceptional cases. - Annual Report lists “key functions”: (i) formulate/implement monetary policy; (ii) protect/enhance financial stability incl. lender of last resort; (iii) promote safety, soundness and integrity of financial institutions regulated by SARB; (iv) enhance resilience to financial shocks; (v) ensure cost-effective availability and integrity of currency; (vi) compile economic statistics and conduct analysis/research; (vii) act as banker to Government; (viii) ensure effective national payment system functioning; (ix) administer prudential and capital flow measures; (x) manage official gold and foreign exchange reserves. - Annual Report specifies functions/activities of wholly-owned subsidiaries: South African Mint Company, South African Bank Note Company, Corporation for Public Deposits, Corporation for Deposit Insurance. - Description — Powers - SARB Act lists powers/duties: form/acquire shares in companies, accept deposits, grant loans/advances, issue securities, buy/sell foreign currencies. - National Payment System Act 78 of 1998, FSR Act, Banks Act set out public and private law powers (Prudential Authority and Resolution Authority roles under FSR Act). - Website explains SARB activities across monetary policy, financial stability, prudential regulation, financial markets, surveillance, payments/settlements and resolution authority. - Annual Report sets out activities/actions in carrying out functions. - SARB Act contains list of prohibited activities (not discussed on website). - Review Expanded Findings - Objectives: price stability and statutory financial stability are clearly disclosed; no clarity on mechanism determining which objective prevails. - Functions: conflation of functions with powers and duties in SARB Act; inconsistencies between functions listed on website and Annual Report; lack of clear legal foundation for different functions. - Powers: not clearly linked to functions; powers dispersed across website sections; lack of explicit communication on SARB’s powers to establish subsidiaries and how subsidiaries’ functions/connect to SARB mandate. - Comments / Recommendations - Create a dedicated website page explaining in plain terms how functions relate to objectives and the legal bases for each function. - Clearly list powers tied to functions and list prohibited activities. - Disclose degree of autonomy variation by objective (price stability vs financial stability). - Provide clarity on subsidiaries’ shareholding structure and how commitments/guarantees relate to SARB mandate. ### Pillar I — Central Bank Governance: Autonomy (Principle 1.3) - Principle 1.3.1 Institutional/Operational Autonomy — Description - Constitution: SARB must perform functions independently and without fear, favor or prejudice, provided regular consultation with Cabinet member responsible for national financial matters. - SARB Act prohibits Government officials/employees and members of Parliament from sitting as Board members. - SARB Act allows Minister to require Board to remedy non-compliance with Minister-made regulations; Minister may apply to Supreme Court to compel Board; Minister may investigate SARB affairs; Minister can designate any director to act as chairman instead of Governor. - SARB has instrument independence in monetary policy execution (operating framework), except foreign exchange function is National Treasury-managed and SARB acts as agent. - Website states SARB independence/autonomy entrenched in Constitution; SARB can use any monetary policy instrument to achieve monetary policy goal; selection of monetary policy goal is Government responsibility. - National Treasury, in consultation with SARB, sets inflation target; SARB independently conducts monetary policy to achieve target via an exchange of letters. - Unclear whether SARB has goal or instrument autonomy for financial stability; website notes SARB may determine a systemic event after consultation with Minister of Finance. - SARB Act allows Minister to make regulations relating to shareholders and appointment of directors and all matters necessary to achieve SARB Act purposes. - Review Core Findings - Ministerial powers under SARB Act appear to conflict with constitutional autonomy; no clarity whether Constitution takes precedence over SARB Act provisions. - MOUs/exchange of letters between SARB and National Treasury exist but are not fully disclosed publicly. - Transparency on arrangements with Minister/National Treasury regarding objectives other than monetary policy is limited. - Comments / Recommendations - On website, set out rationale for autonomy, clarify legal requirements regarding Minister’s role to approve/suspend/defer SARB decisions, and elaborate on SARB–Minister/National Treasury interactions across all mandate aspects. - Principle 1.3.2 Functional Autonomy — Description & Review - See mutatis mutandis discussion under Principle 1.3.1 for scope of SARB institutional/operational autonomy and ability to perform duties without prior government approval. - No additional material beyond Principle 1.3.1. - Principle 1.3.3 Personal Autonomy — Description - SARB Act discloses eligibility and disqualification criteria for appointments. - Appointment authorities: Governor and Deputy Governors appointed by the President after consultation with the Minister and the Board; directors: four appointed by the President after consultation with the Minister and seven elected by shareholders from candidates confirmed by a Panel. - Appointment durations: five years for Governor and Deputy Governors; three years for directors who are Government representatives elected by shareholders and may be reappointed or re-elected. No statutory term limits in SARB Act. - Panel composition and procedures detailed in SARB Act; SARB Act Regulations provide further Panel procedures. - Board composition and biographies disclosed on website and Annual Report; website sets out duration of appointment. - Grounds for dismissal are set out in SARB Act, but dismissal procedures and authorities involved are not disclosed. - Board responsible for general remuneration policy; directors’ remuneration determined by Board and disclosed in Financial Statements. - Annual Report: Remuneration Committee recommends remuneration packages of Governor and Deputy Governors and annual increases; GEC approves remuneration and annual fee increases for non-executive directors. - Banks Act and FSR Act provide indemnity protections for directors/officers/staff in bona fide performance; FSR Act protection extends to Governor, Deputy Governors, board members, officers or staff for actions under financial sector law; SARB stated protection would extend to actions under SARB Act. - Review Expanded Findings - SARB Act does not specify authorities involved in dismissal procedures; term limits unclear (Board decision in 2011 limits non-executive directors to three terms of three years in line with King III Report). - SARB Act lacks indemnity/immunity provision for acts under SARB Act despite Banks Act and FSR Act indemnities. - Comments / Recommendations - Provide public explanation of safeguards for security of tenure, eligibility/disqualification, dismissal procedures, remuneration governance and protections afforded to decision-makers. - Principle 1.3.4 Financial Autonomy — Description - Board approves budget and adopts rules for sound accounting (Section 4A SARB Act). - SARB Act provides for capital, reserves (Section 21), profit calculation and surplus distribution including dividends (Section 24). SARB may create special provisions prior to profit distribution. Dividend procedures further detailed in SARB Act Regulations. - SARB Act establishes reserve accounts: Gold Price Adjustment Account, Foreign Exchange Adjustment Account, Forward Exchange Contracts Adjustment Account, and Gold and Foreign Exchange Contingency Reserve Account (GFECRA) (Sections 25-28). - GFECRA provisions mandate National Treasury to underwrite SARB’s losses from gold and foreign exchange revaluations (see Box 3 on the GFECRA). - SARB Act silent on recapitalization rules and applicable accounting standards; Annual Report discloses accounting standards and explains circumstances where IFRS not followed. - Audited financial statements detail capital, statutory and contingency reserves, and foreign exchange gains/losses; notes explain foreign exchange profits/losses arising from rand valuation are for Government account and transferred to GFECRA; investment returns on foreign exchange reserves and interest on foreign loans are for SARB account and reflected in profit or loss. - Annual Report clarifies separate financial accounts required for Prudential Authority under FSRA. - SARB Act includes provision on monetary financing (Section 10(1)(f)(i)) though criteria unspecified. - SARB Group structure and subsidiaries disclosed in Annual Report; notes disclose commitments and guarantees extended by SARB to subsidiaries and other schemes/facilities. - SARB Group — Subsidiaries & Investments (as disclosed) - The South African Mint Company (RF) Proprietary Limited - Produces coin and coin-related products for South Africa and export market. - Prestige Bullion is a subsidiary of South African Mint; Mint holds a stake of 80 percent. Prestige Bullion distributes/sells bullion Krugerrand coins. Rand Refinery Proprietary Limited has 20 percent stake in Prestige Bullion and handles marketing/distribution. - The South African Bank Note Company (RF) Proprietary Limited (SABN) - Prints all banknotes in South Africa and for neighboring countries; has separate management; board members appointed by SARB Board. - The Corporation for Public Deposits (CPD) - Invests public sector call deposits in deposits, short-term money market instruments and special Treasury Bills; funds and related interest repayable on demand. - The Corporation for Deposit Insurance (CODI) - Established to develop a deposit insurance scheme; SARB will provide a guarantee for deposits that banks place with CODI for the liquidity tier of the deposit insurance fund. - Review Core Findings - SARB has operational independence to develop annual budget per SARB Act, but budget process and Board approval not described publicly. - Financial arrangements regulated in SARB Act and disclosed in audited Financial Statements on website including joint external auditors' opinion. - Information on SARB autonomy over administrative and operating budget not publicly available. - 2024 Budget Review by National Treasury raised public interest in GFECRA; SARB drafted joint Q&A with National Treasury to address questions amid ongoing reform. - Comments / Recommendations - Describe SARB Group composition and financial relationships in a single website section: ownership stakes, investments, financial commitments/guarantees and roles of entities, and linkage to SARB mandate. - Consider additional Annual Report disclosure on budget formulation and explicit statement on annual Board approval. - Amplify communications on SARB role in GFECRA; dedicate website section explaining SARB–National Treasury relationship on GFECRA and consolidate Q&A and senior officials’ remarks. ### Pillar I — Central Bank Governance: Decision-Making Arrangement (Principle 1.4) - Description — Decision-Making Bodies - SARB Act establishes Board of Directors, composition, functions, meeting procedure and quorum. - Act provides for appointment of Governor and three Deputy Governors but does not specify their functions beyond vesting non-Board powers in Governor/Deputy Governors. - Website states Governors’ Executive Committee is responsible for day-to-day decision making. - Annual Report: Governor and Deputy Governors as executive directors responsible for day-to-day policy decisions and management except for areas entrusted to Board, MPC, Prudential Committee, Financial Stability Committee and CODI. - Governor expected to serve as CEO and Chairperson of Board per SARB Act; Board ultimately responsible for governance and oversight; Board Charter defines responsibilities but is not public. - Board may delegate powers to Governor/Deputy Governors or officers; Governor/Deputy Governors may further delegate. SARB has an Instrument of Delegation of Powers not publicly available. - SARB Act provides for Board meeting procedures, voting arrangements and dissent handling. - Annual Report sets out minutes of Ordinary General Meeting of shareholders; SARB Act Regulations specify procedures at ordinary/extraordinary general meetings. - Description — Organizational Structure / Committees - Governor chairs MPC, Financial Stability Committee, Prudential Committee and Governors’ Executive Committee; Deputy Governors sit on these committees. - Website and Annual Report disclose composition/responsibilities of MPC, Financial Stability Committee, Financial Stability Oversight Committee, Prudential Committee, Board Committees (Audit Committee, Board Risk and Ethics Committee, Non-Executive Directors Committee, Remuneration Committee), GEC and sub-committees. - Biographies of Board and MPC members disclosed on website and Annual Report. - MPC, Board committees, Non-Executive Directors’ Committee and GEC have charters/terms of reference not disclosed publicly. Annual Report states Board Charter and terms of reference reviewed every three years. - SARB Act Regulations specify Board meeting procedures. - Description — Strategic Planning - Annual Report sets out Strategic Focus Areas under “Strategy 2025” with objectives, milestones and progress reports. - Review Comprehensive Findings - Organizational structure clarified in SARB Act, website and Annual Report; insufficient clarity on executive management policy formulation role under SARB Act and related legislation. - SARB follows King Report on Corporate Governance (2016) principles where aligned with SARB legislation. - Comments / Recommendations - Disclose a clear overview of organizational structure on website with allocation of responsibilities across internal oversight, day-to-day management and policymaking, including which decision-making body is responsible for general and individual regulatory decisions. - Publish Board Charter, committee charters or summaries of delegation instruments to enhance clarity on delegation and accountability. ### Pillar I — Central Bank Governance: Risk Management (Principle 1.5) - Principle 1.5.1 Risk Exposure — Description - Annual Report (“Risk Management” section) provides overview of key risks from Group perspective; SARB describes itself as risk-averse. - SARB risk management considers public interest responsibilities beyond risk/return tradeoffs. - Principal risks disclosed: strategic, reputational, operational, financial (credit, market, and liquidity risk), and policy process risk (risks related to processes supporting monetary and financial stability policy). - Annual Report includes qualitative developments during financial year: operational risk disclosures such as business continuity management and cyber security. - Dedicated section on climate-related risks and SARB role, including via Prudential Authority. - FY 2022/2023 Financial Statements (Note 29 - Risk management in respect of financial instruments) provide detailed information on levels and quantified developments in SARB exposures to principal financial risks (credit, market, liquidity) and related mitigation strategies. - Review / Additional Notes - Annual Report and financial statement notes contain further mitigation measures and quantified risk disclosures for financial instruments and operations. *Source: Annex I. South African Reserve Bank: Central Bank Transparency Code—Detailed Review (from the provided IMF PDF content).* ### references to methods used for quantification. SARB also discloses the use of financial ### 1zafea2024002-print-pdf - references to methods used for quantification. SARB also discloses the use of financial ### Risk disclosures and risk management framework - Findings: - SARB discloses the use of financial derivative products for portfolio management and outlines a governance structure for use of financial derivatives in the financial statements. - The Annual Report contains an overview of key activities related to risks in the SARB Group and organizational units; the SARB website provides detailed disclosures on governance and committees. - Information on risks is scattered among several subsections of the Annual Report (subsidiaries), and the Annual Report does not provide a comprehensive, high-level overview of SARB’s key risks, direct mapping of risks against SARB’s mandate or objectives, and key developments related to major risks. - SARB’s risk appetite statement is under review and could be included on a dedicated risk management webpage once finalized. - SARB’s comprehensive risk management framework covers strategic, financial (including credit, market and liquidity risk), reputational, operational and policy process risk. - SARB specifically discloses: - Risk governance structure, including Risk Management Committee (RMC) and Board Risk and Ethics Committee. - Role of the Risk Management and Compliance Department (RMCD) and cross-cutting coordination. - Information on the risk universe and approach to financial risk management: risk tolerance implemented through Investment Policy, Strategic Asset Allocation, active risk budget and Investment Guidelines. - Refinement of the Risk Appetite and Tolerance Statement is in progress. - ISO 31000 adopted as SARB Group risk management standard; preparations in progress for Business Continuity Management certification against ISO 22301 BCM international standard. - Recommendations / Comments: - Consolidate risk information (including subsidiaries) in a dedicated Annual Report subsection that maps risks to SARB Group mandate/objectives, includes a brief risk statement and key developments, and presents relative importance of risk sources. - Publish methodology for continuous identification, evaluation, and mitigation of risks. - Consider disclosing existence and charter/terms of reference for the Combined Assurance Forum (CAF) chaired by the Chief Risk Officer and its key activities. ### Accountability, auditing, and internal controls - Findings: - SARB Act requires shareholders to elect two firms of public accountants each year; Regulations require at least two firms registered under the Auditing Profession Act, 2005. - SARB must transmit financial statements, signed by Governor/Deputy Governor and CFO, plus audit report, within three months after financial year end (March 31); these should be Gazetted. Reserve Bank must publish a monthly statement of liabilities and assets. - In practice: SARB maintains an independent Internal Audit Department (IAD); an Audit Committee (sub-committee of the Board) exists; Terms of Reference of the Audit Committee are reviewed every three years. - FY2022/2023 Annual Report includes independently audited standalone and consolidated group financial statements; accounting framework is the SARB Act and IFRS; SARB Act governs accounting treatment of gold and foreign exchange and takes precedence over IFRS. - External audits conducted in accordance with International Standards on Auditing; external auditors’ independence assessed by the Audit Committee; rotation requirements adhered to. - Internal Audit: Internal Audit Charter exists (not published); External Quality Assurance (EQA) overall assessment ‘Generally Conforms’ with IIA Standards; IAD maturity Level 4 ‘Progressive’. - Audit Committee composition and Board members’ biographies disclosed on website; Terms of Reference discussed in Annual Report but not publicly available. - Recommendations / Comments: - Publish Audit Committee Charter (Terms of Reference) to complement Annual Report disclosure. - Publish the Internal Audit Charter and consider dedicating a section on website/Annual Report to internal audit. ### Ethics, anti-corruption measures, and whistle-blowing - Findings: - SARB decision-makers, staff, agents (entire Group) are subject to domestic anti-corruption laws, including: - Prevention and Combating of Corrupt Activities Act, 2004 (Act No. 12 of 2004). - Protected Disclosures Amendment Act, 2017 (Act No. 5 of 2017). - The Financial Markets Act, 2012 (Act No. 19 of 2012). - Protection of Personal Information Act, 2013 (Act No. 4 of 2013). - Promotion of Equality and Prevention of Unfair Discrimination Act, 2000 (Act No. 4 of 2000). - General Data Protection Regulatio. - SARB Ethics Policy exists (not published); Ethics Policy underpins conduct, covers conflict of interest, acceptance of gifts and entertainment, personal trading, commercial crime control, outside occupations, etc.; compliance is a condition of employment. - Board Risk and Ethics Committee oversees ethics management; Risk Management and Compliance Department operationalizes the Ethics Policy via declarations on outside interests, personal account trading, commercial crime risk assessments. - Whistle-blowing mechanism is publicly available, administered by an independent external party, available 24/7; operators trained in English, Afrikaans, isiZulu and Sesotho; Board-approved Whistle-blowing Procedures exist. - Procurement processes described on website with applicable regulations referenced. - Internal Audit assists in identifying potential commercial crime; Audit Committee evaluates procedures for investigating and reporting complaints. - Recommendations / Comments: - Consider publishing all relevant domestic anti-corruption legislation applicable to staff, management and directors on the website. - Publish the Ethics Policy or key provisions/high-level summary in Annual Report. ### Human capital management - Findings: - Annual Report includes a comprehensive “People matters” section with detailed staff statistics: - SARB’s 2 381 employees (including the Board) - gender and racial composition disclosed. - Breakdown by age, years of service, employee equity, persons with disability, staff turnover. - Evolution of headcount over five-year period by gender and race. - Total amount paid in salaries and spending related to training and development disclosed. - Employee Engagement Survey outcomes disclosed; record participation and retained Platinum Seal of Achievement in Deloitte Best Company Survey. - Diversity and Inclusion program implemented since 2020 and in final phases. - Remuneration Committee (Remco) reviews HR framework and remuneration policies; recommends remuneration packages for Governor and Deputy Governors and annual increases for staff. - Careers page (“Work @SARB”) contains details of current openings and recruitment programs (Chartered Accountant Trainee Program, Data Scientist Program). - Review: Comprehensive - Comments: None ### Communication and external engagement - Findings: - Legal disclosure requirements include Articles 31 and 32 of SARB Act: Governor submits annual report to Minister of Finance; monthly statements and annual financial statements transmitted to Department of Finance and gazetted; shareholder information transmitted within sixty days after financial year end. - Communications Division reports to the Governor (not disclosed on website); organizational structure not disclosed on website. - Internal documents guiding communications (communication policy under review, 3-year communication strategy, stakeholder engagement strategy) are not publicly disclosed. - Open communications is a core value and part of SARB’s 2025 Strategic Plan Enablement Focus Areas. - Stakeholder engagement strategy defines three stakeholder groups: SARB employees, the general public, established stakeholders; Annual Report lists communication tools and statistics (events, participants, social media followers, website metrics). - Key communication vehicles: Newsroom, Monetary Policy Review (semiannual), Financial Stability Review, Quarterly Bulletin (since 1946), Working Papers, Occasional Bulletins, speeches by Governor and GEC members. - Six Monetary Policy Committee meetings per year; Monetary Policy Statement released at 3:00pm the next day; statement read at press conference at 3pm and followed by virtual analyst briefing under Chatham House Rules. - Website is the key communication channel; active use of LinkedIn, Twitter, Facebook. - Ipsos Corporate Reputation Survey conducted every two years; short summary in Annual Report but survey not published externally. - Recommendations / Comments: - Publish key elements of communication architecture: role, functions, staffing of communications unit; publish or summarize communication policy and stakeholder engagement strategy. - Improve website accessibility and search function; provide sign-up for email notifications for new releases. - Systematize key communication arrangements and develop targeted communication campaigns for emerging challenges. - Publish more detailed reputation survey results and enhance evaluation of communication policies. ### Confidentiality and access to information - Findings: - SARB Act Section 33 sets confidentiality rules: staff shall not disclose information relating to SARB affairs, shareholders, clients acquired in the performance of duties except to Minister or Director-General of Finance for performance of duties or when required by law; exceptions require written consent of Minister and Governor after consultation with client for certain items. - Written communications marked confidential/secret are protected from disclosure except under other laws or court. - PAIA/POPIA Manual prescribes access to information in accordance with Promotion of Access to Information Act 2000 and Protection of Personal Information Act, 2013; Manual explains processing, rights to request correction/deletion, SARB External Privacy Notice discloses types/purposes of processed personal information. - Manual distinguishes subjects and categories of records (Chapter 7) and categories automatically available (Chapter 8). - SARB has internal classification policy (top secret, secret, confidential, restricted); publishes public information via website. - SARB does not publish anonymous/aggregated information on legal disputes related to confidentiality/secrecy. - Recommendations / Comments: - Consider publishing internal framework for classification of confidential information. - Disclose whether stakeholder input was sought on confidentiality policy. - Consider publishing anonymous/aggregated information on legal disputes surrounding confidentiality policy. ### Monetary policy transparency and framework - Findings: - Objective: constitutional mandate to protect the value of the rand by keeping inflation low and steady. - Inflation target: consumer price inflation between 3 and 6 percent established in 2000, re-affirmed in 2010, updated in 2017 placing more emphasis on 4.5 percent midpoint. - Policy instrument: repurchase (repo) rate is principal monetary policy instrument; explanation of transmission and related FAQs provided. - Monetary Policy Committee (MPC) meets six times per year; Monetary Policy Statement released at 3:00pm the next day after decision completion; statement accompanied by full forecast package including projected policy rate path and MPC vote. - QPM (Quarterly Projection Model) adopted in 2017; QPM model and data are available on SARB website; all data used in monetary policy communications available in zip files. - Semiannual Monetary Policy Review (April and October) provides more detailed analysis; Quarterly Bulletin provides detailed data and analysis since 1946. - Recommendations / Comments: - Publish the documentation specifying the inflation target set by National Treasury (or link to it). - Explain the key role of the market-determined flexible exchange rate on monetary independence on the monetary policy page. - Provide more attribution or explanation of dissenting votes (non-attributed meeting summary or noting dissenters’ risk assessments). - Make Monetary Policy Statements consistent with MPC authorship (currently released by Governor’s office). - Consider publishing risk scenarios/alternative projections in MPR to illustrate uncertainty and the SARB’s reaction function. - Consider rationalizing publication calendar (e.g., 4 MPRs per year with corresponding projections). ### Foreign exchange management and exchange controls - Findings: - South Africa has exchange controls since 1939; Currency and Exchange Act, 1933 (Act No.9 of 1933) foundation; Regulations promulgated 1961-12-01 and amended up to Government Notice No. R.445 (Government Gazette No. 35430 of 8 June 2012). - Responsibility for exchange control policy vests with Minister of Finance; certain powers delegated to designated SARB officials in terms of Regulation 22E; SARB acts in advisory capacity to Government on exchange controls. - Currency and Exchanges Manuals for Authorized Dealers (AD) and AD in foreign exchange with limited authority available on SARB website; Exchange Control Circulars issued by Financial Surveillance Department uploaded on SARB webpage. - Recommendations / Comments: - Advisory role to Government on exchange controls covered under Official Relations sections (Pillar V). ### Foreign exchange policy, interventions, and supporting analysis - Findings: - Monetary policy framework: explicit medium-term inflation target and de jure floating exchange rate. - SARB abstains from active FX market intervention to influence exchange rate value; may intervene to accumulate reserves, smooth impact of large FX transactions, or restore market liquidity/functioning when disorderly. - Interventions are discretionary, rare; SARB did not intervene in March 2020. - Decision-making process for interventions is discretionary and not disclosed. - SARB analysis indicates medium-to-long term exchange rate drivers: relative price levels with major trading partners; short-term drivers: relative interest rates, movements in terms of trade (commodity export prices and energy import prices), shifts in market sentiment. - Recommendations / Comments: - Improve documentation on intervention framework (objectives, principles, instruments). - Consider disclosing timing, amount, and rationale for interventions when they occur. - Undertake research into efficacy of past interventions and identification of exceptional circumstances warranting intervention. ### Foreign exchange reserve management - Findings: - Control over foreign currency reserves and accruals vested in Treasury; SARB manages all FX reserves including Treasury’s share. - Investment Policy published on SARB website outlines objectives, strategic framework, oversight, and SAA implementation. - Investment objectives in order of priority: - Capital preservation. - Liquidity. - Returns. - Reserves are segregated into tranches (Liquidity Tranche and Investment Tranche); Liquidity Tranche subdivided into SDR Sub-tranche, Gold Sub-tranche, Working Capital Sub-tranche, Buffer Sub-tranche. - SDR Sub-tranche supports IMF membership needs; Gold Sub-tranche reflects South Africa’s willingness to hold gold; Working Capital for short-term liabilities; Buffer for unforeseen liquidity needs. - Investment Tranche aims to enhance returns consistent with capital preservation and liquidity objectives. - Decision-making and oversight: SARB Board, Board Risk and Ethics Committee, Governors’ Executive Committee, Risk Management Committee, Reserves Management Committee (Resmanco), supported by functional departments; Board responsible for oversight of risk management process. - Strategic Asset Allocation quantifies risk tolerance; SAA, Investment Guidelines, and Investment Policy govern tranche sizes, currency composition, asset classes; Investment Guideline updated annually with input from National Treasury but not publicly disclosed. - Recommendations / Comments: - Disclose non-market-sensitive elements of SARB Investment Guideline to enhance transparency. - Interactions with Treasury on reserves management covered under Official Relations (Pillar V). ### Macroprudential policy, financial stability, and decision-making - Findings: - FSR Act Section 11 mandates SARB to protect and enhance financial stability and restore/maintain it if a systemic event is imminent/occurred; Section 12 requires monitoring strengths/weaknesses and risks. - SARB publishes macroprudential policy framework and a dedicated website explaining mandate and implementation. - Committees and forums: - Financial Stability Oversight Committee (FSOC) statutory from 1 April 2018; chaired by Governor; includes National Treasury and other regulators; provides recommendations and advice, including designation of systemic institutions. - Financial Sector Contingency Forum (FSCF) statutory; chaired by Governor; includes industry representatives; assists FSOC with identification of risks and contingency planning. - Financial Markets Liaison Group (FMLG) consultative forum chaired by Deputy Governor; terms of reference, calendar and outcomes disclosed. - Financial Stability Forum established for outreach (composition and topics not fully detailed). - SARB published Topical Briefing (June 2021) explaining systemic risk assessment and macroprudential framework; FSR provides periodic indicators, early warning indicators and stress test results. - Examples of SARB macroprudential actions and public disclosures: - FSC resolved a positive cycle-neutral (PCN) countercyclical capital buffer (CCyB) of one percent to be implemented in South Africa; phase-in commences January 2025 and to be fully implemented by 31 December 2025. - FSC resolved sovereign-bank nexus developments did not require formal policy intervention at the time; Prudential Authority to develop monitoring of valuation gaps in banks’ holdings of SA government bonds. - SARB collaborated with FSOC members on FATF grey-listing and EU high-risk listing. - FSR and topical briefings disclose key indicators: heat map, financial cycle, Financial Conditions Index (FCI), Growth at Risk, SRISK, Credit-to-GDP gap; Risk Assessment Matrix (RAM) presented quarterly and published in FSR. - Recommendations / Comments: - Provide more details on Financial Stability Forum composition, meeting schedule, and topics. - Announce macroprudential decisions in a timely manner (not wait for FSR); consider publishing meetings/tasks/outcomes of FSOC and FSCF analogous to FMLG disclosures. - Publish key indicators in a structured manner on the website (table or box) under financial stability. ### Emergency liquidity support and lender-of-last-resort (LOLR) - Market-wide liquidity support: - Findings: - SARB Act and Constitution provide powers to act as Lender of Last Resort and provide market-wide and bilateral liquidity support. - Market-wide liquidity support provided in 2020 via SARB bond-buying program announced in March 25, 2020 media statement; SARB published a FAQ explaining the measure. - Draft discussion paper “Repo facility to assist non-bank financial institutions with liquidity during a market dysfunction” and related Publication Notice Invitation are available on SARB website. - Recommendations / Comments: - When developed, participants would benefit from disclosures of key elements of a framework for handling systemic market dysfunction. - Bilateral liquidity support (ELA): - Findings: - SARB published a Position Paper on emergency liquidity assistance for banks (available on website) providing policy framework for ELA: criteria, legal requirements, collateral guidelines; Paragraph 9.1 states disclosure of ELA is at SARB discretion. - Review: Comprehensive ### Other areas (AML/CFT, resolution, FMIs) - Findings: - PA (Prudential Authority) is designated AML/CFT supervisory body for banks, mutual banks, cooperative banks, life insurers, and clearing system participants (text truncated at end of content). - Recommendation: - Further details on AML/CFT supervisory arrangements are provided under relevant documentation (content unit ends here). *Source: 1zafea2024002-print-pdf - references to methods used for quantification. SARB also discloses the use of financial* ### Section 2(b) of Schedule 2 of the ### 1zafea2024002-print-pdf - Section 2(b) of Schedule 2 of the ### AML/CFT supervisory responsibilities and disclosure - Designated supervisors and practical vesting: - The PA is the designated AML/CFT supervisory body pursuant to Section 2(b) of Schedule 2 of the FIC Act; for practical purposes, the PA’s AML/CFT supervisory responsibilities are vested in the Financial Conglomerate Supervision Department (FCSD). - FinSurv is the designated AML/CFT supervisory body for Authorised Dealers in Foreign Exchange with Limited Authority (ADLAs), pursuant to Section 2(c) of Schedule 2 of the FIC Act; for practical purposes, FinSurv’s AML/CFT supervisory responsibilities are vested in the Compliance and Enforcement Division (CED) and the ADLA Supervision Division (ASD). - Legal bases and enforcement powers: - SARB’s AML/CFT supervisory powers are elaborated in Sections 45-45B of the FIC Act (for the PA and FinSurv) and Chapter 9 of the Financial Sector Regulation Act, 2017 (for the PA). - Relevant enforcement powers are elaborated in Section 45C of the FIC Act (for the PA and FinSurv) and Chapter 10 of the Financial Sector Regulation Act (for the PA). - Public disclosure practices: - Laws and regulations (FIC Act, Financial Sector Regulation Act, Exchange Control Regulations) are public; however, proactive disclosure of supervisory and enforcement powers by SARB is limited. - PA’s inspection and enforcement powers are briefly mentioned on its AML/CFT-dedicated webpage and FAQ. - FinSurv’s information-gathering, inspection, and enforcement powers are presented in Sections B.2(H), (I), and (J) of the ADLA Manual (v.1.67). - Thematic guidelines: PA publishes “guidance notes”; FinSurv publishes the ADLA Manual and occasional circulars. - Consultation processes for draft guidelines: - Formal process (not described on SARB website) generally involves: - Draft guidelines published with an e-mail address for comments over a specified period (typically around four to six weeks). - Comments summarized in a comment matrix that may be published. - Guidelines updated as SARB deems appropriate in light of comments. - Both PA and FinSurv conduct regular industry consultations; PA proactively discloses consultations under “Local Cooperation”, FinSurv does not. - Review and recommendations: - Review: Expanded — guidelines are accessible; supervisory policies are largely confidential. - Comments: - PA could supplement its AML/CFT webpage with: (i) general description of supervisory policies; (ii) a list of supervisory powers; and (iii) an explanation or link to the SARB’s processes for collecting, managing, and integrating public comments. - FinSurv could establish an AML/CFT-dedicated webpage mirroring the PA’s supplemented content. ### Internal AML/CFT controls (Principle 2.10.2 / 3.11.2) - Description of SARB internal AML/CFT control framework: - SARB is not formally considered an “accountable institution” per Schedule 1 of the FIC Act but is subject where applicable to the full range of AML/CFT requirements in that Act. - The SARB’s internal AML/CFT control function (AML/CFT Team of the CMD) is located within the RMCD. The CMD is led by a Compliance Officer registered with the FIC. - IAD audits CMD’s AML/CFT policies, procedures, and operational effectiveness on a triennial basis and submits reports to the Board Audit Committee (BAC) and Board Risk and Ethics Committee (BREC). - IAD has well-defined universal procedures for follow-up on remediation and reporting to the BAC. - Resources and activities (internal team): - The AML/CFT Team of the CMD comprises three staff who report directly to the head of the CMD/the Compliance Officer. - Team activities include: - Annual assessment of SARB operations that may give rise to ML/TF risk (including (re)purchase of Krugerrand from private parties and replacement of stained/damaged banknotes). - Establishing and maintaining a risk management and compliance program. - Supporting the FMD in customer due diligence. - Screening transactions against sanctions lists. - Reviewing potentially suspicious transactions and submitting STRs, CTRs, and other regulatory reports. - Arranging internal/external AML/CFT training for SARB staff. - Statistics are tracked manually and included in an Annual Compliance Report presented to the Compliance Officer, the Risk Management Committee, and the BREC. - AML/CFT Team’s resources are not audited separately; IAD will indicate impact and recommend resource review if capacity constraints cause a “major failure”. - Disclosure gaps, review outcome, and recommendation: - Review: Not Implemented — SARB has established controls and audits, but does not proactively disclose organization, mandate, policies, procedures, audit schedule, or IAD follow-up processes. - Comments: RMCD could establish an AML/CFT-dedicated webpage describing the organization, mandate, basic policies/procedures, noting periodic IAD audit; include link to IAD universal procedures and remediation follow-up timeline. RMCD could also include an updated list of SARB operations that could give rise to ML/TF risk, a general description of AML/CFT Team activities, and a brief account of human and financial resources. ### PA and FinSurv AML/CFT supervisory process disclosure (Principle 3.11.1) - What is disclosed: - PA proactively discloses limited general information on AML/CFT supervisory approach and on-site inspection processes via a dedicated webpage and FAQ. - PA discloses basic description of quarterly and as-needed engagements with private sector and number of on-site inspections / inspection reports completed (also captured in FIC Annual Report). - Additional detailed information on PA and FinSurv supervisory approach, methods, resources, and statistics were disclosed to the IMF for the October 2021 Detailed Assessment Report on AML/CFT. - What is not disclosed: - PA does not publish types of inspections (comprehensive, thematic, specific), scope (including foreign branches/subsidiaries), or supervisory resources (number and organization of AML/CFT team, budget). - FinSurv does not proactively disclose its AML/CFT supervisory approach, processes, resources, or activities (number of inspections captured in FIC Annual Report only). - Neither supervisor discloses names of institutions subject to off-site follow-up or on-site inspection, nor associated dates. - Review and recommendations: - Review: Core — important information was shared with IMF, but not regularly published; mutual evaluation is infrequent. - Comments: PA and FinSurv could prepare detailed summaries of AML/CFT supervisory approaches and processes (drawing on information provided to IMF/FATF/internal sources) and publish on dedicated webpages with regularly updated statistics on supervisory activities and resources. PA could supplement existing page; FinSurv should establish a dedicated AML/CFT webpage. ### Monetary policy operational framework and instruments (Principle 3.1, 3.1.1–3.1.3) - MPIF adoption and objectives: - In the first half of 2022, SARB launched a new Monetary Policy Implementation Framework (MPIF), replacing a “scarce-reserve” framework with a “surplus-reserve” tiered-floor system. - Primary objective: strengthen transmission of monetary policy via the repo rate (principal monetary policy instrument) given excess reserves in banking system; support efficient functioning of financial markets and offer flexibility to provide liquidity during market dysfunction without compromising policy implementation. - Main features and instruments: - Standing deposit facility: pays interest on excess reserves. - Banks depositing excess reserves receive the repo rate on reserves up to their SARB-assigned quota (quota based on size of liabilities). - Deposits beyond quota receive a deposit interest rate set at 100 bps below the repo rate. - Incentive: banks trade excess reserves above quota in interbank market to obtain higher return. - “Tiering” of the interest rate floor reflects the impact of the quota. - Standing lending facility: banks can borrow reserves at a rate of 100 bps above the repo rate. - Weekly repo auctions at the repo rate in fixed quantities and discretionary supplementary facilities at the repo rate to support system liquidity and facilitate transmission. - Required bank reserves are set at 2.5% of liabilities; SARB has not altered this minimum requirement since 1998. - Access and counterparties: - Counterparties must be participants in South African Multiple-option Settlement system (real-time gross settlement) operated by SARB; must be banks regulated and supervised by PA and accepted by PASA as members. - SARB shares on-boarding responsibility with PASA; on-boarding information is disclosed but could be better organized and cross-referenced. - Disclosure and review: - Review: Comprehensive — operational framework, instruments, collateral, access criteria, and technical guidance (including quotas) are disclosed on SARB website. - Comments: SARB’s transparency on MPIF contributed to successful implementation. ### Cross-border financial flows and foreign exchange administration (Principle 3.2, 3.3) - Institutional delegation and scope: - Financial Surveillance Department of SARB implements and administers Treasury-defined policies related to Cross-Border Financial Flows and Foreign Exchange Administration. - Treasury delegated powers to Governor, a Deputy-Governor, and Financial Surveillance Department, including appointing Authorized Dealers (ADs) and Authorized Dealers in foreign exchange with limited authority (ADLAs). - Manuals, permissions, and processes: - Authorized Dealer Manual and ADLA Manual contain permissions, conditions, administrative responsibilities, and FinSurv Reporting System requirements; must be read in conjunction with Regulations and FIC Act. - Exchange Control Circulars communicate amendments to permissions/conditions and administrative responsibilities to ADs and ADLAs. - Financial Surveillance Department may conduct investigations or appoint investigators under Regulation 19; disclosed in “Legal context” and “Introduction” sections of Currency and Exchanges Manuals. - Q&A on SARB website provides non-technical guidance for public and summarizes framework. - ADs and ADLAs act on behalf of customers, not as agents for FinSurv; SARB only accepts requests/applications submitted by AD or ADLA on behalf of client. - Coverage and disclosure: - Manuals, guidelines for business entities and individuals, Exchange Control Circulars, Regulations, Orders and Rules are available on SARB website. - Review: Comprehensive — instruments, circumstances of use, persons/transactions regulated, licensing, monitoring, sanctions, and processes are clearly defined and disclosed. - Comments: Transparency could be enhanced by periodic disclosures of outcomes of quarterly meetings with AD and ADLA for non-market-sensitive matters. ### Foreign exchange reserve management (Principle 3.4) - Investment Policy and disclosures: - Investment Policy document discloses broad selection criteria for eligible asset classes, composition of instruments, investment horizon, and constraints. - Annexure A: comprehensive list of eligible assets. - Annexure B and B: list of eligible currencies. - Annexure C: detailed guidelines for assessing credit risk. - Notes 6 and 29 of annual audited financial statements provide detailed composition of reserves (types of assets, maturity, structure, derivatives), credit risk information (share of assets by rating, IFRS 9 discussion), liquidity and settlement risks, and currency distribution distinguishing US dollar, Euro, Pound Sterling, Chinese Yan and other currencies. - Criteria for counterparties and service providers: - Criteria disclosed in Investment Policy (Annexure A and C) and on SARB website section dealing with FX reserve management, including external fund management program details. - Adequacy and liquidity parameters: - Broad criteria disclosed: - Adequate level of reserves covers known and likely trade and debt obligations; optimal level includes provision for unanticipated obligations; optimal range calculated and reviewed annually using generally accepted models. - Optimal amount determined using factors including short-term external debt, probability of sudden stop, imports, exports, GDP growth, cost/return of holding reserves. SARB does not target a specific level of reserves. - Liquidity parameters: reserves divided into Liquidity Tranche (based on adequate level) and Investment Tranche (amounts in excess). Liquidity Tranche subdivided into four sub-tranches; Investment Tranche invested for higher returns consistent with capital preservation and liquidity. - SARB Investment Guidelines outline metrics and are reviewed annually with National Treasury input; elements of this document are not publicly disclosed. - Review and recommendations: - Review: Comprehensive for instruments and selection criteria; Expanded for adequacy/liquidity disclosure — lacks detailed quantitative analysis to quantify adequate/optimal levels. - Comments: - Disclosure of non-market sensitive components of Investment Guidelines or key macrofinancial features affecting adequacy and liquidity parameters would enhance transparency. - Disclosure of a clearer conceptual framework for FX reserve adequacy (GFECRA implementation) updated yearly would be beneficial. - Interactions with Treasury are covered in Pillar V Transparency in Official Relations. ### Financial stability reviews, stress testing, and macroprudential policy (Principles 3.5–3.6) - Financial Stability Review (FSR): - FSR Act requires SARB to assess financial system stability and communicate via biannual FSR. - FSC reviews stability at four meetings per year. - FSR content includes: assessment over six-month review period; risks to stability over next 12 months; overview of steps taken by SARB and regulators; overview of recommendations and implementation progress. - FSR tabled in Parliament (Standing Committee on Finance) and presented to external stakeholders at Financial Stability Forum. - Review: Comprehensive — SARB provides forward-looking assessments, identifies channels and mitigations, and discloses methods and data. - Macroprudential stress testing (CSST, ICSST, climate-related): - CSST (banks) and ICSST (insurers) are typically biennial, using common severe scenarios and conservative assumptions; CSST conducted bottom-up and top-down with sensitivity analyses. - Key 2023 CSST assumptions and indicators (summary): - Balance sheet growth: Credit assets required to increase at same pace as annual growth rate in nominal private sector credit extension; no risk-weighted assets optimization allowed. - Income Statement: Real net interest income growth not permitted; operating expenses excluding variable remuneration assumed to grow by at least headline inflation. - Capital: Only profits appropriated via board resolution qualify as capital; capital issuances/redemptions allowed in line with board-approved capital plans as at reference date. - Credit Risk: Provisioning for expected credit losses assumed in line with IFRS 9’s perfect foresight assumption; no cures from credit-impaired exposures are allowed; in adverse scenarios, credit risk-weighted assets cannot fall below reference date. - Management Actions: No management actions are factored into results. - Scenarios: baseline, domestic Adverse, global adverse — described in FSR. - 2023 exercises: - CSST covered six South African banks designated systemically important, representing 93 percent of total banking sector assets. - Inaugural bottom-up ICSST in 2023/24 covered largest insurers (four non-life, five life) on solo-entity level. - Results indicated banks are adequately capitalized to withstand protracted economic disruptions in adverse scenarios. - Climate-related stress tests and scenario analysis are conducted to raise awareness and build capacity. - Disclosure: SARB publishes methods, key assumptions, scenarios, aggregate results in FSR; individual bank results not published. - Review: Comprehensive — methods, assumptions, design, and aggregate results disclosed. - Comments: SARB may consider providing more stress testing information on a dedicated website, covering various scenarios and key indicators. - Macroprudential policy instruments and enforcement: - SARB monitors via Financial Stability Indicators (FSI), heatmap, stress-testing, network/interconnectedness measures, financial conditions index (FCI), qualitative analyses, and topical briefings. - Macroprudential instruments disclosed and classified: capital-based (countercyclical capital buffers, sectoral capital requirements, dynamic provisions); asset-side (loan-to-value, debt-to-income); ratio caps (liquidity coverage ratio, net stable funding ratio). - Selection and implementation guided by effectiveness, efficiency, and transparency. - Enforcement: PA enforces macroprudential measures; PA is a prudential regulator within SARB per FSR Act and issues/enforces measures. PA consults stakeholders on major regulatory changes. - Review: Comprehensive — design, objectives, scope, enforcement mechanisms, and responsible agencies disclosed. ### Emergency liquidity assistance (ELA), market-wide and bilateral liquidity support (Principle 3.8) - Market-wide liquidity support disclosure: - SARB discloses market-wide support once confidentiality need has ceased; example: March–April 2020 bond-buying program during COVID-19 widely disclosed across several publications (FSR editions and Annual Reports listed in source content). - Review: Comprehensive — COVID-19 market-wide support widely disclosed and analyzed. - Bilateral liquidity support disclosure: - Under 2022 ELA policy SARB may disclose provision of bilateral liquidity support, but there have been no disclosures of ELA since the new framework is in place. - Review: Not Applicable (no disclosures). ### Monetary policy accountability and outcomes (Pillar IV) - Governance and outreach (Principle 4.1.1): - SARB accountability supported by publication of Monetary Policy Statement, Monetary Policy Review, and Annual Report; Governor appears semi-annually and annually to Parliament. - After monetary policy decisions, Governor and MPC hold televised press conferences and virtual meetings with market participants; MPC members present MPR at Monetary Policy Forums nationwide. - Other outreach: Quarterly Economic Roundtables; Annual MPC Schools Challenge (12th year) involving more than 400 schools. - SARB compares forecast accuracy for inflation and output in April MPR each year and explains forecast errors. - A commissioned ex-post evaluation in 2022 by Patrick Honohan and Athanasios Orphanides was released as a Working Paper (not directly published by NT or SARB). - Review: Comprehensive — multi-pronged transparency and accountability approach. - Comment: SARB should consider regular ex-post evaluations of its monetary policy framework and implementation, with external experts or external review of self-assessments. - Policy progress disclosure (Principle 4.1.2): - Monetary policy publications (bi-monthly Monetary Policy Statement and semi-annual Monetary Policy Review) include detailed analysis of current conjecture, CPI inflation relative to target, and complete projections of CPI inflation, output, and repo policy rate. - CPI inflation target: 4.5 percent within a 3 to 6 percent range. - Projections are based on the Quarterly Projection Model that generates a repo rate path to close the output gap and return inflation to target; publications discuss risks identified by MPC affecting prospects and timing for achieving the inflation objective. - Review: Comprehensive. - Comment: SARB could better explain its interpretation of the 3 to 6 percent target range. *Source: 1zafea2024002-print-pdf - Section 2(b) of Schedule 2 of the (excerpts provided).* ### 4.5 percent midpoint. For example, does the range reflect normal variation in the inflation ### 4.5 percent midpoint. For example, does the range reflect normal variation in the inflation ### Operations (Principle 4.1.3) - The SARB discloses extensive, mostly daily, data on the implementation of monetary policy under the new “tiered-floor” system. - Daily Monetary Operations note includes: - the total quota amount, - the banks’ total amount within quota and in excess of quota being held in the standing facilities in the SARB, - the volumes at the weekly repo auction. - There is a daily note on the benchmark overnight interest rates: Sabor, Zaronia and the Overnight FX rate, and the volumes transacted. - The proximity of these overnight benchmark rates to the repo rate is used to indicate: - how well the target for the monetary stance is being achieved, - the overall transmission of monetary policy. - Review: Comprehensive - Comments: None ### Cross-Border Financial Flows and Foreign Exchange Administration (Principle 4.2) - Governance Actions (Principle 4.2.1) - Responsibility for exchange control policy vests with the Minister of Finance, who delegated certain powers and functions to designated officials of the SARB. - Treasury delegated to the Governor, a Deputy-Governor, the Head of the Financial Surveillance Department, and various other officials certain powers under the Exchange Control Regulations, including: - appointing certain registered banks to act as Authorized Dealers in foreign exchange, - appointing Authorized Dealers in foreign exchange with limited authority (ADLAs). - Appointment gives these banks and ADLAs the right to buy and sell foreign exchange, subject to conditions and within limits prescribed by the FinSurv. - Authorized Dealers and ADLAs are not agents for the FinSurv, but act on behalf of their customers. - The Financial Surveillance Department implements and administers exchange control policy on behalf of the Government; all policy decisions are taken by the Minister of Finance and the SARB acts in an advisory capacity. - The Financial Surveillance Department is empowered to conduct investigations or to appoint investigators under Exchange Control Regulation 19. - Relevant information is disclosed in the Currency and Exchanges Manual for Authorized Dealers and the Currency and Exchanges Manual for Authorized Dealers in foreign exchange with limited authority on the SARB website. - Review: Core - Comments: While the SARB discloses clearly to whom it is accountable (i.e., the National Treasury), no disclosures document how the policy has been discharged. Disclosures related to the discharge of the SARB’s delegated responsibility would enhance transparency. - Policies (Principle 4.2.2) - All policy decisions related to Cross-Border Financial Flows and Foreign Exchange Administration are taken by the Minister of Finance; the SARB acts in an advisory capacity. - Major changes to policy/exchange control reforms are announced by the Minister of Finance on an ad hoc basis in the Budget Speech or Medium-Term Budget Policy Statement; reforms and reasons/objectives are contained in the Budget Review. - Review: Not applicable - Comments: SARB’s advisory role is covered in Official Relations sections of the CBT (Pillar V). - Implementation (Principle 4.2.3) - The Financial Surveillance Department only shares information about results of its actions related to cross-border financial flows and foreign exchange administration with internal stakeholders, other regulators, and on request with the National Treasury. - Review: Not implemented - Comments: - Results of policy implementation are only shared with the National Treasury on request. - Disclosure of non-market sensitive information on results of policy implementation, for instance in its Annual Report, would enhance transparency. - Market participants would benefit from disclosures on thematic outcomes of policy implementation (e.g., areas leading to interpretations by SARB in response to AD/ADLA queries; key outcomes of supervisory actions and related sanctions). ### Foreign Exchange Management (Principle 4.3) - Governance Actions (Principle 4.3.1) - The SARB does not actively manage the value of the rand exchange rate, but only intervenes in the foreign exchange market under certain prescribed circumstances; such interventions have not occurred for several years. - The decision-making process for intervention under these circumstances, including for market dysfunction, exists but is not disclosed. - Review: Not applicable - Comments: (none recorded) - Policies (Principle 4.3.2) - See Section 2.3.1 - Review: Not applicable - Comments: - The SARB did not analyze or explicitly disclose the estimated impact of past foreign exchange interventions. - Efforts were made to sterilize the impact of past foreign exchange market interventions on the domestic money supply to limit the impact on the monetary policy stance. - Operations (Principle 4.3.3) - See Section 2.3.1 - Review: Not applicable - Comments: The SARB did not explicitly disclose past foreign exchange interventions. ### Foreign Exchange Reserve Management (Principle 4.4) - Governance Actions (Principle 4.4.1) - General principles of internal governance for FX reserve management are provided in the Investment Policy (sections 8 and 10) and summarized on the SARB website. - Section 8: sets out the governance framework for the management of foreign exchange reserves, lines of responsibility, reporting requirements and timelines. - Section 10: outlines control activities, delegation of oversight, internal audit requirements and actions under an emergency situation. - Review: Comprehensive - Comments: None - Reporting on Implementation (Principle 4.4.2) - The Bank publishes the official foreign exchange reserves on its website on a monthly basis; the publication reflects: - the gross reserves, - foreign currency liabilities, - its forward position, - discussion on drivers of monthly changes (market movements or withdrawals/injections). - The Bank does not forecast future movements or withdrawals/injections. - The currency composition of reserves is disclosed only on an annual basis in the SARB Annual Report and associated annual financial statements. - Review: Expanded - The SARB discloses on a monthly basis the level of reserve assets, and more detailed information (in particular the currency composition) in the annual audited financial accounts. - Comments: - Disclosures on the drains that can lead to demand on reserves at a predefined frequency would enhance transparency. - A more frequent publication of the currency composition of the official foreign exchange reserves than the current one-year periodicity would also enhance transparency. - Financial Results (Principle 4.4.3) - The audited financial statements section on FX reserve management provides: - detailed information on composition of the FX reserves (types of assets, maturity structure; derivatives) — Note 6, - detailed information on credit risk associated with FX reserve management (share of the assets by rating and a discussion along the lines of IFRS 9), liquidity and settlement risks, and a currency distribution distinguishing the US dollar, Euro, Pound Sterling, Chinese Yan and other currencies — Note 29. - Review: Comprehensive - Comments: See assessment under Pillar 1 Tools – Independently Audited Financial Statements and Risk Exposures (1.6.2). ### Macroprudential Policy (Principle 4.5) - Governance Actions (Principle 4.5.1) - The FSR Act requires the SARB to assess the stability of the financial system at least every six months and to communicate its assessment in the FSR. - The FSR must include: - Assessment of the stability of the financial system during the six-month review period. - Identification and assessment of the risks to financial stability in at least the next 12 months. - Overview of steps taken by the SARB and the financial sector regulators to identify and manage identified risks and vulnerabilities in the financial system. - Overview of recommendations made by the SARB and the FSOC during the period under review, and progress made in implementing those recommendations. - The FSR is tabled and discussed in Parliament and presented to stakeholders through the Financial Stability Forum. - The SARB conducts impact studies and cost/benefit analyses of macroprudential policy changes, for example the CCyB. - Most macroprudential instruments are implemented through financial sector regulators and communicated through those channels. - Review: Comprehensive - Comments: None - Policies (Principle 4.5.2) - The SARB discloses ex-post evaluations of macroprudential policies via staff working papers. - Example: a study investigated the effect of the introduction of the Net Stable Funding Ratio (NSFR) on South African domestic banks’ lending and concluded: - NSFR regulations in South Africa are largely compliant with Basel III standards. - While total lending does not appear to have been affected, the analysis indicated specific impacts (text truncated in source). - Review: (not explicitly provided in this section) - Comments: (none recorded) *Source: Excerpt from the SARB transparency and practices assessment in the provided PDF content.* ### introduction of the NSFR has influenced loan composition and maturity profiles. ### 1zafea2024002-print-pdf - introduction of the NSFR has influenced loan composition and maturity profiles. ### Macroprudential Policy and Credit Allocation - Findings: - The introduction of the NSFR has influenced loan composition and maturity profiles. - A study on South Africa’s credit market response to macroprudential policy measures, focusing on borrower heterogeneity, found that macroprudential regulation has reduced lending to households. - The study also revealed that regulation triggers lenders’ adverse selection by penalizing more creditworthy enterprises. - The results suggest that while Basel III has reduced reckless consumer credit, it has also redistributed finance in ways that are not beneficial to long-term growth and financial stability. - Recommendations / Comments: - The SARB is encouraged to publish on a regular basis, on its website, briefings and dedicated studies dedicated to the evaluations of its macroprudential policy actions and whether the intended objectives have been achieved, including analysis of the impacts of specific measures and tools. ### COVID-19 Response, Monetary Measures, and Liquidity Support - Actions taken: - Early in the Covid-19 pandemic, the SARB acted swiftly and introduced measures encompassing monetary policy instruments, interventions in financial market operations, regulatory tools as well as collaborations with other entities to provide relief to the economy and enable the financial sector to help customers in need. - These measures are described in its 20/21 Annual Report (page 17). They cover the functioning of the financial market, lowering repo rate, administrating government guarantee scheme, and temporary regulatory relief. - The SARB disclosed the impact of each measure for the intended objectives. - The SARB disclosed the provision of market-wide liquidity support on its bond-buying program during the COVID-19 pandemic. - ELA framework and disclosure: - The SARB was established by the Constitution of South Africa in terms of Section 223 - 225; Section 225 extends SARB functions to include those ordinarily performed by central banks, including acting as Lender of Last Resort. - The South African Reserve Bank Act provides the SARB with powers to provide emergency liquidity assistance (ELA). - The SARB has published a Paper on the SARB’s internal ELA Policy, which sets out the scope, principles, and conditions under which the SARB may consider providing ELA. - The Paper states that disclosure of any ELA provided is at the SARB’s discretion after consideration of factors including financial stability considerations. - CCyB (Countercyclical Capital Buffer): - The SARB introduced a cycle-neutral countercyclical capital buffer of one percent be implemented for the banking sector. - The phase-in period for implementing the CCyB will commence on January 2025, and is to be fully implemented by 31 December 2025. - The SARB intends to do an economic impact assessment of the decision; the outcomes of which are due to be published in the November 2024 FSR. ### AML/CFT Supervision, Disclosure, and Remedial Actions - Current disclosure practices: - The PA proactively discloses outcomes of its “core” activities, including sectoral risk assessments and enforcement actions. - In 2021, the PA published a compiled list of the administrative sanctions it imposed from April 2014-April 2021 (for banks) and July 2020-September 2021 (for life insurers). - In 2023, the PA issued an AML/CFT Awareness Communiqué (“AML/CFT/CPF Communication 1 of 2023”) detailing key deficiencies identified from April 2019-March 2023. - Updates to these documents are not posted on a regular basis due to capacity constraints; no update had been posted as of May 2024. - All administrative sanctions imposed by the PA are disclosed in “real time” via press (“media”) releases issued by the SARB in accordance with Section 45C(11) of the FIC Act, published with a brief delay in PA annual reports, and reposted by the FIC. Included in every instance are: (i) the name of the sanctioned institution; (ii) the specific violation(s) found; and (iii) the enforcement action(s) taken/administrative sanction(s) levied. - Limitations in disclosure: - While the PA cooperates with sanctioned institutions and receives quarterly progress reports on remedial actions, those remedial actions are not disclosed to the public. - Remedial actions taken by supervised institutions in response to PA-issued recommendations are not published. - FinSurv has not yet published its ML/TF risk assessments of the ADLA sector or summaries of the findings and does not post compilations of key deficiencies or administrative sanctions imposed; however, administrative sanctions are disclosed via press releases containing the institution name, violations, and enforcement actions. - FinSurv conducts follow-up inspections of sanctioned institutions but does not disclose the remedial actions taken nor remedial actions taken by ADLAs in response to FinSurv-issued recommendations. - The PA and FinSurv provided the IMF with sufficient information to conclude, in the October 2021 Detailed Assessment Report on AML/CFT, that inspections and sanctions have had a positive impact in certain areas, but that information is not in the public domain. - Review status and recommendations: - Review: Expanded — Unlike the PA, FinSurv has not yet published sectoral risk assessments or compilations of key deficiencies and administrative sanctions. Neither the PA nor FinSurv discloses remedial actions taken by supervised institutions. - Comments / Recommendations: - The PA could: (i) post regular updates to “AML/CFT/CPF Communication 1 of 2023” and to its compiled list of the administrative sanctions imposed on banks and life insurers for violations of the FIC Act; (ii) publish analytic summaries of the results of its thematic inspections; and (iii) systematically disclose the remedial actions taken by supervised institutions. - FinSurv could publish its ML/TF risk assessments of the ADLA sector (or summaries), prepare and post periodic compilations of key deficiencies and administrative sanctions, and systematically disclose remedial actions taken by sanctioned institutions. ### Internal AML/CFT Controls and Audit - Current practices and constraints: - Information on outcomes of the AML/CFT Team’s activities (e.g., number and type of customers rejected or regulatory reports submitted to the FIC) is included in its Annual Compliance Report, but that report is neither mentioned nor published on the SARB’s website. - The AML/CFT Team works with the Legal Services Department (LSD) to track legal, regulatory, or policy ambiguities or gaps, but does not produce public-facing reports on these issues. - The AML/CFT Team does not compile ML/TF typologies that may involve SARB products and services or analyze evolving SARB compliance failures. - Due to operational sensitivities, the IAD does not publish its reports on the internal AML/CFT control function, summaries of findings, or lists of remedial actions taken. - Review status: - Review: Not Implemented — The RMCD does not publish information on outcomes of the AML/CFT Team’s activities, nor disclose identified legal, regulatory, or policy ambiguities or gaps. The AML/CFT Team does not compile ML/TF typologies or analyze related compliance failures. The IAD does not disclose its findings or recommendations to the public and only tracks implementation internally. - Recommendations: - The RMCD could publish a brief summary of the AML/CFT Team’s Annual Compliance Report capturing: (i) the types of compliance failures identified, if any, along with important trends; and (ii) basic statistics regarding the number and type of customers rejected and of suspicious transactions identified and reported. - The IAD could consider whether operational sensitivities preclude publication, in general terms, of key findings and recommendations from its periodic reports on the internal AML/CFT control function. ### Consumer Protection - Description and review: - The SARB has no mandate for financial services consumer protection. - Review: Not applicable - Comments: None ### Central Bank–Government Relations and Institutional Arrangements - Legal and institutional framework: - Section 224 of the Constitution of South Africa provides that the SARB must perform its functions independently, with regular consultation between the SARB and the Minister of Finance. - The SARB provides advice to the government, manages foreign exchange reserves, acts as a fiscal agent, coordinates financial stability issues, and institutionalizes reporting requirements among its roles. - As fiscal agent, the Financial Services Department provides banking services to the government including processing, settlement and recording of immediate settlements for high-value domestic payments and Electronic Fund Transfer payments scheduled or processed by National Treasury via the payments clearing bureaus. - The SARB provides services related to government debt instruments as a central securities depository for issuance, auction and settlement and related corporate action for government securities, including fixed rate, floating rate, sukuk and inflation-linked bond issuances as well as treasury bills. - The SARB is not directly involved in the issuance of hard currency debt. - Operational details: - The NT pays a reference rate of South African Benchmark overnight rate on its tax and loan (cash account) balance with commercial banks. The SARB is responsible for collecting the data and publishing these rates. The rate is a combination of call deposits, interbank rates, and foreign exchange implied rates. - Coordination mechanisms: - The SARB interacts with the government through four Standing Committees: - Macroeconomic Standing Committee. - Financial Sector Policy and Regulation Committee. - Standing Committee on Banking and Financial Markets. - International Relations Standing Committee. - The Standing Committee on Banking and Financial Markets aims to encourage a smooth and sound relation between the SARB and NT, contributing to cost-effective and sound debt management policy; improving co-operation in the management of government account configuration; advising on debt and reserves management strategy and policies; sharing information on domestic and global financial and capital markets; and evaluating the impact of government’s funding strategy and the SARB’s monetary operations. - Monetary policy framework: - The inflation objective is covered by a letter sent by the Minister of Finance to the Governor; the last time this letter was sent in 2010 and made public. - A technical working group (under the Macroeconomic Standing Committee) was set up to substantiate the revision of the target (both level and mechanism). - The South African government, in consultation with the SARB, set up an inflation target (3–6 percent) to measure price stability and the SARB strives to keep inflation within the target range, preferably close to the midpoint of *Source: 1zafea2024002-print-pdf - introduction of the NSFR has influenced loan composition and maturity profiles.* ### 4.5 percent. ### 4.5 percent. ### Interaction with government: governance, consultations, and disclosure - The SARB interacts with the NT to define the metrics associated with the adequacy and liquidity parameters of the reserves as outlined in the SARB Investment Guidelines and is reviewed on annual basis. - The SARB benefits from input provided by the NT, although this consultation is not publicly disclosed. - Cross-border financial flows and foreign exchange administration policy is taken by the Minister of Finance while the SARB acts in an advisory capacity to Government. - The Financial Surveillance Department only shares information with internal stakeholders, and other regulators, e.g., SARS and FSCA on results in achieving the policy objectives. Information is also shared on request with the NT. - As financial stability, the SARB must act within a policy framework agreed between the Minister and the Governor and must have regard to the roles and functions of other organs of state exercising powers that affect aspects of the economy. - The SARB must submit a copy of each review to the Minister and the Financial Stability Oversight Committee for information and allow the Minister or the Financial Stability Oversight Committee at least two weeks to make comments. - The SARB needs to consult the Minister before determining whether a specified event or circumstance is to be considered a systemic event. - The SARB discloses its interaction with the government on a few and specific matters: - The SARB disclosed the reform to the settlement framework for the GFECRA, as a result of the February 2024 Budget Review. This reform has been agreed between NT and the SARB. Through Frequently Asked Questions document, the SARB provided detailed technical information. - The SARB disclosed information on COVID-19 Loan Guarantee Scheme developed by the NT and SARB. The loan guarantee scheme is an initiative to provide loans, guaranteed by government, to eligible businesses to meet some of their operational expenses such as for salaries, rent and lease agreements, contracts with suppliers, etc. - The SARB does not disclose the formal arrangement of the interaction with the government, which is based on, inter alia, MOU. This MOU determines the terms and conditions of engagement between the SARB and NT. It also envisages regular meetings between the Minister and Governor to discuss the policies relevant to both institutions. The SARB and NT are currently working on revising the MOU. - As agreed with the government, the SARB discloses notices providing detail of the US dollar equivalent of the level of the SARB’s official gold and foreign exchange reserves, Special Drawing Rights, and foreign currency deposits received from customers. ### Review and recommended transparency improvements (interaction with government) - Review: Core — SARB’s functions with respect to the government and provisions describing their cooperation are established in the legal framework. The SARB and NT have well established relations on practice guided by the MOU. However, meaningful information on the services, modalities, instruments, and the outcome of its interaction with the government is rarely published. - Comments / Recommendations: - The SARB may consider revealing its interaction with the government in a structured and regular manner, including its services, responsibilities, cooperation and coordination and major events. This could be done by setting up a dedicated webpage. - The SARB may consider publishing the tools and institutional arrangements to interact with the government such as MOU, terms of reference, etc. covering but not exclusively the work of various committees, subcommittees, working groups, including the four standing committees. ### Fiscal agent role, banking operations and transactions with government (Principle 5.1.2–5.1.4) - Description: The SARB provides advice on economic policies, acts as a fiscal agent, manages reserves; this information is disclosed in the Audited Financial Statements in the annual report. The SARB refers to its annual report for the services it offers as fiscal agent. Disclosure regarding government borrowing and strategy is published on the NT website, while SARB publishes the auction calendar. Nevertheless, there is no publicly available information describing how the SARB is implementing its fiscal agent function. - Review (Principle 5.1.2): Not implemented. - Comments: The SARB needs to disclose on a regular basis information on its policies and terms and conditions governing its interaction with the government, including the various roles such as fiscal agent, banking operations, etc. - Principle 5.1.3 — instruments used in interaction: - Instruments are defined in several legal acts, MOUs and Terms of Reference (TOR). Most of the documentation such as the legal act and TORs are published on the website, while a few MOUs are publicly available. Outcomes of these interactions are discussed throughout SARB’s Annual Report for 2022/23. - The SARB publishes information on national foreign debt both public and private sectors and holding of foreign bonds and equities. - The SARB discloses the surplus of the SARB, after provisions normally provided for by bankers and payment of dividends, to the government. Foreign exchange profits or losses are booked on the account of government and are thus transferred to the GFECRA. - As banker to the government, the SARB provides banking services to the SA government on a monthly basis and earns revenue in the form of bank charges. Performance obligations include electronic funds transfers, foreign and local payments and deposits from commercial banks; bank charges are recognized at a point in time when the service has been rendered. - Review (Principle 5.1.3): Core — The SARB does disclose some of the instruments used to interact with the government and its agencies. - Comments: The SARB needs to clearly define and disclose on a structured and regular basis the instruments used in its interaction with the government and its agency. - Principle 5.1.4 — disclosure of outcomes: - Outcomes are published in annual reports. Specific disclosures include: - The volume and value of SARB’s holding of government bonds and treasury bills are described in the financial statement. The SARB informed that there were no purchases of SA government bonds during 2022/23. - The revaluation of the gains and losses incurred on gold holding is reflected in the GFECRA, which operates in terms of section 28 of the SARB Act. - Foreign exchange transactions are settled subject to agreement between the SARB and the government and consist mainly of the exchange margin. For instance, during the reporting year 2022/23, a net amount of R53.7 million was settled by government. - Foreign deposits of the government are managed by the SARB as part of the foreign exchange reserves portfolio until such time when these deposits are withdrawn by National Treasury. - Inter-Governmental Cash Co-ordination loans are advanced as part of the national government loans arrangement, in terms of which some state-owned entities and treasuries of provincial governments deposit excess funds to form pool of funds from the public sector. - In accordance with the SARB Act, the SARB acts as fiscal agent of the government in its dealings with International Financial Institutions. Accounts with the IMF, which records all transactions with the IMF, are disclosed in the financial statements. - Foreign exchange profits or losses of the SARB, insofar as they arise from changes in the value of the rand compared to other currencies, are booked on the account of government and consequently all these profits or losses are transferred to the GFECRA in terms of sections 25 to 28 of the SARB Act. - In terms of section 25 of the SARB Act, all gains or losses on gold, held by the SARB, are for the account of the government and transferred to the GFECRA. - In terms of section 24 of the SARB Act, nine-tenths of the surplus of the SARB, after provisions normally provided for by bankers and payment of dividends, must be paid to the government. For the year ended 31 March 2023, no profits were due to the SA government by the SARB. - Review (Principle 5.1.4): Expanded — The legal framework contains a clear mechanism for the establishment of the terms and conditions of the SARB’s functions with respect to the government. The SARB discloses publicly the outcomes of its interaction, including operations with the government. - Comments / Recommendation: The SARB is advised publishing on a more regular basis and in accessible manner the outcomes of its interaction with the government through press release and statements. ### Relationships with domestic financial agencies (Principles 5.2.x) - Principle 5.2.1 — legal basis and disclosure: - Relationships are defined in legislations including the FSR Act. The FSR Act establishes the FSOC and provides for interagency coordination and cooperation. The SARB discloses objectives of institutions and the nature of cooperation, although no information is available on the meetings and the outcomes. - The Corporation for Public Deposits (CPD) is a subsidiary of the SARB; governed by the Corporation for Public Deposits Act 46 of 1984. CPD accepts call deposits from the public sector and invests in short-term money-market instruments and special Treasury bills; with permission of the Minister of Finance, CPD may accept call deposits from other depositors. SARB is responsible for the investment of the CPD’s cash and for making funds available should public entities, limited to members of the intergovernmental cash coordination facility, choose to borrow from the facility. - SARB discloses ownership in two subsidiaries for banknotes and coins: South African Mint Company (RF) Proprietary Limited (SA Mint) and South African Bank Note Company (RF) Proprietary Limited. SARB forecasts and calculates annually the volume of banknotes and coin needed to meet public demand. - A MOU was signed between the SARB, FIC and the PA to regulate cooperation, collaboration and exchange of information. - Review (Principle 5.2.1): Expanded — SARB discloses information on the legal framework which contains provisions establishing cooperation and coordination with domestic financial regulatory and supervisory authorities. - Principle 5.2.2 — policies, instruments and outcomes: - Main legal instruments: legal acts, MOUs, terms of reference, and agreements governing interactions with FSCA, NCR, and FIC. - SARB disclosed cooperation and collaboration arrangements with the Financial Intelligence Center (FIC). - Review (Principle 5.2.2): Expanded — The policies and instruments used in interaction and the outcome of the interaction are transparent. - Comments / Recommendation: The relations to domestic financial institutions are disclosed on the website, but the arrangements with agencies participating in the FSOC and FSCS are not disclosed. A more sustained practice of disclosing the arrangements with these agencies would be beneficial to increase SARB transparency practices. - Principle 5.2.3 — macroprudential role: - The legal framework contains provisions establishing cooperation between the SARB and domestic financial regulatory and supervisory authorities and basic terms and conditions for information sharing and coordination. - Review: Expanded. - Comments / Recommendation: The SARB may consider disclosing more information on its interaction with other governmental agencies on issues related to financial stability, including arrangements, allocations of tasks, and outcomes of its major interactions. - Principle 5.2.4 — arrangements to restore or maintain financial stability: - Sections 26 and 27 of the FSR Act require financial sector regulators to co-operate and collaborate with the SARB and with each other and to sign MOUs to implement such cooperation and collaboration. MOUs are in place to facilitate necessary information sharing between the SARB and the FSCA, the SARB and the PA, the SARB, PA and the FIC and the SARB and the NCR. - The SARB is in the process of implementing a data sharing platform for purposes of enabling its financial stability mandate. - Information on cooperation with other governmental agencies is published on the SARB website, including composition of committees and subcommittees and their main objectives. There is little information on meetings, tasks, outcomes. - Review (Principle 5.2.4): Expanded — Legal framework contains provisions for cooperation and information sharing. - Comments / Recommendations: The SARB (with consent of counterparties) may consider disclosing more information on meetings, tasks and outcomes for each meeting of the FSOC and FSCF. Options include publishing a joint press statement after each meeting broadly outlining the agenda and brief annual summaries of topics discussed. ### Relations with foreign agencies and international organizations (Principle 5.3) - The SARB discloses involvement in international and regional organizations and forums on its website, including: Group of Twenty (G20), International Monetary Fund, World Bank, BRICS, Financial Stability Board (FSB), Bank for International Settlements (BIS), Basel Committee on Banking Supervision, International Association of Insurance Supervisors, Committee on Payments and Market Infrastructures, International Organization of Securities Commissions, Financial Action Task Force, International Association of Deposit Insurers, Committee of Central Bank Governors, Southern African Development Community, Association of African Central Banks (AACB) and Common Monetary Area. - The Governor and management chair several international forums (examples provided in text). - Bilateral arrangements disclosed: - MOU with the People’s Bank of China for clearing and settlement of Renminbi in South Africa; both central banks agreed to coordinate and cooperate on supervision, oversight and clearing of Renminbi and to exchange information. - Cooperation agreement with the Deutsche Bundesbank; the Bundesbank announced its representative to be based in Pretoria. - Regional initiatives disclosed: AACB workshops in Cairo May 2019 and terms of reference approved at annual meeting in Kigali, Rwanda, in August 2019. - SARB international strategy objectives: - Enhance domestic economic and financial policy formulation and implementation by drawing on international best practice; - Enhance the profile and relevance of the SARB in international discussions in support of advancing South Africa’s and Africa’s interests; - Promote regional economic and financial integration in SADC and Africa. - Review (Principle 5.3): Comprehensive — The SARB clearly defines and discloses its relationship, incl. exchange of information and coordination of actions/policies with international and regional organizations. - Comments / Recommendation: The SARB needs to enhance the disclosure of bilateral arrangements with other central banks, including information on financial transactions, commitments, obligations and rights arising from such relations. ### Involvement with private and semi-public institutions (Principle 5.4) - The SARB interacts with the private sector through committees, forums and financial tools. - Financial Markets Liaison Group (FMLG): - Consultative forum established as joint initiative between SARB and key financial market participants. Chaired by deputy governor responsible for markets and international. Members include senior representatives from major domestic banks and non-bank financial institutions, the International Banking Association, National Treasury and various SARB departments. Meetings are held semi-annually; special meetings convened when issues require urgent discussion. - Financial Stability Forum established to reach out to external stakeholders on financial stability and macroprudential issues; no detailed public information on composition or topics discussed. - SARB participates in the Intergovernmental Fintech Working Group (IFWG) promoting fintech solutions; members include SARB, PA, NT, FIC, FSCA, NCR, and Competition Commission. In October 2022, SARB published feedback on IFWG’s first regulatory sandbox initiative. - Bank resolution example: SARB put African Bank Limited (ABL) under curatorship in August 2014. On 1 June 2021, SARB announced process to dispose of its 50 percent shareholding in ABL; in March 22 2022, SARB concluded that none of the interested investors would be suitable to acquire the SARB’s shareholding at this stage. - Review (Principle 5.4): Comprehensive — The SARB discloses its involvement with private or (semi) public institutions, including investments in a private financial entity. *Source: 1zafea2024002-print-pdf - 4.5 percent.* ### Annex II. List of SARB Units and External Stakeholders ### Annex II. List of SARB Units and External Stakeholders ### South African Reserve Bank Senior Management and Staff - Governor - Deputy Governors - Members of Monetary Policy Committee - Members of the Board of Directors - Chief Information Officer - Communication Division - Economic Research Department - Financial Markets Department - Financial Stability Department - Financial Surveillance Department - Human Resources Cluster - Internal Audit Department - International Economic Relations & Policy Department - Legal Services Department - Prudential Authority - Risk Management and Compliance Department ### External Stakeholders in Cape Town, Johannesburg, and Pretoria - Academia (University of Pretoria) - The Banking Association South Africa - Financial Intelligence Centre - Financial Services Conduct Authority - National Assembly Standing Committee on Finance - National Credit Regulator - National Treasury - Media Representatives (Bloomberg, Business Day, Financial Mail) - Private Sector Representatives (ABSA, Citi, First Rand, Goldman Sachs, HSBC, JP Morgan, Investec, Morgan Stanley, RMB, Standard Bank) - Trade Unions (COSATU) *Source: Annex II. List of SARB Units and External Stakeholders (1zafea2024002-print-pdf).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1zafea2024002-print-pdf.pdf_