The development of the resolution framework and the establishment of the Corporation for Deposit Insurance in South Africa
The development of the resolution framework and the establishment of the Corporation for Deposit Insurance in South Africa

Author(s): Shenaaz Meer
Subject(s): Law, Constitution, Jurisprudence, Law on Economics, Commercial Law
Published by: Societatea de Stiinte Juridice si Administrative
Keywords: financial institutions; South Africa; deposit insurance; financial system;
Summary/Abstract: Financial institutions are regarded as too big to fail if they are so systemically important that if they do fail, they cannot be closed or liquidated without having a devastating impact on the financial system, the economy and consumers. Governments in the past, to avoid such outcome have been obliged to support such institutions using taxpayer funds. The consequence meant that shareholders and creditors shared in the good times of profits and risktaking, but taxpayers had to unfortunately bear the burden of such losses and the impact on governmental finances became a heavy burden to bear. The practical process for triggering a resolution and activating certain steps will need to be set out and determined. The mechanisms and operational elements will need to be embedded and integrated in existing systems and processes both at the Resolution Authority and in various financial institutions. All policy discussions and proposed legislative amendments will and has involved a robust public participation process as FSLAB steers its way through the Parliamentary process. Industry has been involved in prior consultation and multiple interventions will co-create this complex discipline and has contributed to the collective understanding to ensure the implementation of an effective regime in South Africa.

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