The Prudential Authority's watchful eye on SA's smaller banks
The Prudential Authority (PA) was established on April 1, 2018, as part of the "Twin Peaks" model for financial regulation in South Africa.
Twin Peaks is a financial sector regulatory framework that divides regulatory functions between two independent authorities: the PA and the Financial Sector Conduct Authority with the aim of enhancing financial stability and consumer protection.
A case in point in terms of risk was the African Bank collapse in August 2014 due to liquidity problems, which mostly came because of excessive unsecured lending that placed the bank under curatorship, effectively splitting it into a "bad bank" and a "good bank". The so-called good bank has subsequently become profitable.
African Bank's collapse sped up the introduction of the new oversight regime.
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IOL News
2 days ago
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African Bank store in Cape Town. The banks credit rating was upgraded by the international credit rating agency S&P Global, which expected that the bank will continued to scale and diversify in futrure, without negatively impacting Image: File S&P Global Ratings has upgraded African Bank's long-term global scale issuer credit rating to 'B+' from 'B,' with a stable outlook, and affirmed the short-term global scale rating at 'B.' - the only local bank to have its rating raised by the issuer, while the ratings of other banks were affirmed. S&P Global affirmed the ratings of Absa Bank, BNP Paribas Personal Finance South Africa, Capitec Bank, FirstRand Bank, Investec Bank, Nedbank, and the Development Bank of South Africa. 'In our view, the South African banking system is now in an expansion phase,' S&P said on its website. On African Bank, S&P said the upgrade reflected the bank's more supportive economic environment, coupled with strong capitalisation that partially compensated for its weak asset quality indicators. 'We expect African Bank will continue to scale and diversify, particularly in retail… we do not expect a significant inflow of non-performing loans from the new production,' the rating agency said. African Bank welcomed the latest S&P Global Ratings upgrade as recognition of its progress on strengthening its balance sheet, diversifying its offerings, and reaffirming its founding purpose: to make banking accessible to all South Africans,' CEO Kennedy Bungane said Wednesday. 'This upgrade acknowledges the work we have put in over the last few years and gives us further confidence we are on the right track. It reflects on our financial performance, capitalisation, and improved asset quality while expanding our offerings to our customers,' Bungane said. Video Player is loading. 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Next Stay Close ✕ He said that as the bank marked 50 years, the new rating would enhance its reputation and position it strongly towards becoming a listed institution, which was another step in it's commitment to build a customer-centric, digitally enabled diversified business that is scalable and sustainable. The S&P announcement follows hard on the heels of African Bank's interim results for the six months to March 31, 2025, which saw net profit after tax increase by 15% to R202 million. The group also reported a 20% rise in net advances to R39 billion, 6% growth in customers to 6.1 million, and non-interest income growth of 38%. 'Our growth has been driven by a disciplined approach to risk and compliance management, diversification of our balance sheet, and increased digital enhancements across the business. The Excelerate strategy is positioning us to deliver long-term value for stakeholders,' said the bank's CFO Anbann Chetti. Key strategies included leadership alignment for a listed environment, regulatory compliance, and inclusive ownership models that reflect African Bank's founding values: 'We are building a future-fit bank with the scale and agility to serve more South Africans,' Bungane said. On the local banking sector outlook, S&P said they expect cautious credit growth and moderate increases in real estate prices in the next couple of years. They expect South Africa's GDP to likely rise by 1.5% on average over 2025-2028, after only 0.6% in 2024. 'We expect investment in infrastructure, including logistics and renewable projects, will create lending opportunities for banks. We also anticipate household lending will increase at a measured pace supported by the reduction in interest rates,' the global rating agency said.
