SA, emerging markets in same ‘policy dilemma’
|Published
File photo: Reuters File photo: Reuters
Johannesburg - The Reserve Bank was concerned about the possible impact on employment of last week’s increase in the repo rate, but said it had had no choice as it faced the same “policy dilemma” as central banks in emerging markets – slow economic growth and increasing inflation.
“How could we not be concerned with employment… but we are tasked with protecting the value of the rand,” deputy governor Lesetja Kganyago told journalists after his presentation to the parliamentary portfolio committee on trade and industry’s hearing into the proposed amendments to the National Credit Act.
He said despite the increase in the repo rate, the country’s monetary policy “is still very accommodative… this is because of our concern about weak growth”. He noted that the impact of a change in the rate tended to become evident about 12 to 18 months later.
During his presentation, Kganyago said the introduction, later this year, of the “twin peaks” regulatory system would improve the effectiveness of the financial regulatory system. The system will shift from the current multiplicity of regulators, which operate in industry-based silos, to one that will regulate market conduct and promote financial system stability.
The Financial Services Board, representing one of the peaks, will regulate how financial companies conduct their business, including the design and price of products and treatment of customers.
The Reserve Bank, representing the second peak, will be responsible for the stability of the financial system.
He told the committee that there needed to be a rationalisation of the many financial sector regulators. “When it comes to regulators it is not a case of the more the merrier, it is a case of the fewer the better. It will help to minimise the scope for ‘regulatory shopping’.”
He referred to efforts to reform the banks’ payment system and to concerns about the abuse of “garnishee orders”, which force employers to make deductions from an employee’s salary or wage in settlement of a debt owed to a third party.
Kganyago said garnishee orders were being awarded too easily and the Reserve Bank, the Department of Trade and Industry and the Justice Department were in talks to determine how a system designed to enforce matrimonial payments could be protected from abuse.
He said that more than 10 years ago when he was director-general at the National Treasury, it emerged that many public servants took home only R500 a month because of deductions by microlenders. “The government decided to shut down this payment system.”
However, he cautioned about the unintended consequences that could result from the proposal that consumers’ credit information be expunged.
“Conservative lenders will look and, if there is no information about a potential borrower, they will be concerned and want to charge more.” - Business Report