Part V Mixed Legal Systems, 16 The Republic of South Africa

Subject(s):

Civil liability of lenders — Regulatory liability of lenders — Bank resolution and insolvency — Bank supervision — Capital markets — Supervision

An overview and discussion of the private law liability of financial supervisors in the Republic of South Africa are provided. The supervision of the South African financial system is in the process of change. The supervisory liability historically was limited and currently, since the introduction of a twin peaks model of regulation in 2018, potential supervisory liability is again limited and now only to instances where one can prove the absence of good faith. If a supervisor has acted in bad faith, there is no immunity from liability. In such an instance, the determination of wrongfulness in the light of public and legal policy considerations and constitutional principles may point in the direction of holding the supervisory authority liable. However, supervisory liability has not been tested in the South African courts and the proving of such will not be an easy task. In the absence of a deposit insurance and banking resolution scheme (both of which have been tabled in Parliament) the position of depositors is not secure and indeed precarious. Public law remedies exist to potentially alleviate and correct the impact of wrong decisions made by supervisors, but very little protection exist as yet to depositors, and they have to rely on the goodwill of the government to step in when a financial institution has to be resolved.