To obtain the authorisation of the Registrar, the foreign institution is required to lodge with the Registrar a written application on a prescribed form listing:
- the name of the foreign institution;
- the country in which it was established;
- the name of its proposed chief representative officer in South Africa; and
- the address of its proposed representative officer in South Africa.
A foreign institution is required to have held, not earlier than 18 months prior to such foreign institution’s application to establish a branch and at all times during the operation of its branch, net assets as certified by its auditors and reflected in its audited financial statements to a total value of at least US$1 billion, provided that:
- in the calculation of the value of such net assets, intangible assets that are not readily marketable shall be excluded; and
- in the event of a foreign institution having to rely on the assets of the banking group to which it belongs in order to meet the requirement of net assets of at least US$1 billion, such foreign institution shall hold net assets of its own, calculated in the manner and held in accordance with the provisions of this paragraph, of not less than US$400 million.
In addition, the foreign institution must have a long-term investment grade debt rating, acceptable to the Registrar, from an internationally recognised credit assessment agency.
The branch is required to manage its affairs in such a way that the sum of its branch capital does not at any time amount to less than the greater of:
an amount of R250 million; or
a minimum of 8%, or such higher percentage as may be determined by the Registrar in consultation with the Governor of the Reserve Bank, of the amount of the assets and other risk exposures of the branch.
If the sum of the branch capital exceeds the prescribed minimum, that sum may not be decreased without the prior written approval of the Registrar. The Registrar may approve branch capital of less than R250 million, subject to conditions which the Registrar may determine. The value of the unencumbered assets of a branch must not amount to less than such a percentage of its liabilities in South Africa as specified in writing by the Registrar, provided that the branch is required to calculate the relevant required amount of its unencumbered assets and its liabilities in South Africa on a daily basis and report such amounts to the Registrar, in writing, every calendar month.
At least two natural persons residing in South Africa must be appointed to conduct the management of the business of the branch, at least one of whom shall be the chief executive officer of the branch.
The business operations of a branch must also be covered and supported by a valid letter of comfort and undertaking issued by its foreign parent institution.
The prescribed fee for an application for authorisation to establish a branch office is R7,500 (excluding VAT) and must be accompanied by a certificate of competent authority in the home country to the effect that the foreign institution concerned is authorised to conduct a business in that country similar to the business of a bank. The Registrar may further require the foreign institution which is applying for a foreign banking licence to furnish information regarding the nature and extent of supervision exercised, or to be exercised by the responsible supervisory authority of the home country of the foreign institution.
A local branch of a foreign bank may not use a name other than the name under which it was authorised, or any literal translation or abbreviation of it, or any other name which has been approved by the Registrar. The name cannot be identical or even closely resemble the name of an existing bank.
If the Registrar grants an application for authorisation to conduct a business of a bank by means of a branch in South Africa, he must issue to the foreign institution concerned, a certificate of authorisation to conduct such business, on payment of a registration fee of R1,000 (excluding VAT).
The Banks Act determines that any foreign institution that conducts the business of a bank by means of a branch in South Africa without having obtained the Registrar’s written authorisation is guilty of an offence.
INCORPORATION IN SOUTH AFRICA
Apart from the option discussed above, there is a further option available to any foreign institution which wishes to enter the South African banking market, and that is the incorporation of a South African subsidiary of the foreign institution.
The local subsidiary must be a public company registered as a bank in terms of the Bank Act. An external company that has no other operations elsewhere in the world can be converted, at any time, into a local subsidiary company.
A foreign institution, in determining which alternative would be best suitable, should consider the requirements of the Banks Act such as:
minimum share capital and unimpaired reserve funds;
minimum liquid assets;
concentration risk;
failure or inability to comply with prudential requirements;
minimum reserve balances; and
minimum capital and reserve funds in respect of the banking group.