Exclusive: Pityana’s fight exposes banking regulator’s lawlessness

A DAMNING court ruling has exposed the SA Reserve Bank’s (Sarb’s) Prudential Authority (PA) for unlawfully blocking business leader Sipho Pityana’s appointment to the Absa board — raising serious questions about the regulator’s abuse of power, lack of accountability, and disregard for the rule of law.

In an exclusive interview with the Sunday Independent, Pityana — now fully vindicated by the courts — pulled no punches in his condemnation of the Sarb’s conduct, accusing it of acting as a rogue institution that places itself above the law.

His case has set a legal precedent that might have sent shockwaves through the financial sector: banks and their regulators cannot operate outside the law, and boards must resist unlawful pressure from those meant to oversee them. “What was the basis for their objection? They never said I was unfit,” Pityana said candidly.

The PA’s campaign against Pityana was shrouded in secrecy and bad faith from the start. “The Reserve Bank first indicated they had issues with my nomination by suggesting I may not be a ‘fit and proper person’ — without ever formally asserting that I was implicated in harassment or any misconduct,” Pityana said. “In fact, in all the court papers, they stated that they never asserted I was unfit or unqualified. They never actually said I wasn’t a fit and proper person.”

This raises a critical question: If the PA never formally declared Pityana unfit, on what legal grounds did it block his appointment? The answer, it seems, is none. “These assertions don’t align with their mandated position — that they can only object to a nomination if they believe someone is not a fit and proper person,” Pityana pointed out. “So again, what was the actual basis of their objection?” The court found that there was none.

The PA acted without legal justification, relying instead on informal, “backroom processes” to strong-arm the Absa Board into rejecting Pityana.

The PA had firmly defended its legality and conduct amid debates over its role in the appointment of bank executives. Central to its arguments was that it had not acted unlawfully or beyond its powers under the Banks Act.

In court filings, the PA stated: “The Authority always acted lawfully,” affirming that its interactions with banks were in line with regulatory standards.

Regarding the nomination process itself, the PA highlighted its statutory authority to review and potentially object to candidate appointments. It said: “Section 60(5) of the Banks Act read with Regulation 42(1)(a) of the Regulations and section 60(5)(b) of the Banks Act provide that the notice must reach the Authority at least 30 days before the proposed date of appointment,” and that “the Authority may object to the proposed appointment by means of a written notice, stating the grounds for objection.”

The PA further argued that its oversight included providing early guidance to banks. “Financial institutions often engage with the Authority in advance of any nomination of directors or senior executives. They seek early guidance regarding any fitness or proprietary concerns,” it said, underlining that these interactions were part of the regulatory process and were intended “to facilitate compliance with the statutory requirements by banks”.

Judge Luleka Flatela’s judgment, however, underscored that the PA’s actions went beyond these prescribed procedures. She stated: “The First Respondent acted unlawfully and in excess of its powers per the Banks Act 94 of 1990 by engaging in an informal process with the Second and Third Respondents in connection with the nomination of the Applicant as Chairperson of the Second and Third Respondents’ board of directors, and in particular by notifying the Second and Third Respondents of its objection, alternative intention to object to the Applicant’s nomination.”

Pityana did not mince words when describing the PA’s conduct: “They knew the process they were following was unlawful. Everything they submitted in court suggested they understood the unlawfulness of their actions but looked for excuses to justify using the informal process.”

The PA’s defence was as flimsy as it was alarming. “In their legal documents, they tried to defend it by saying they could investigate informally and then implement decisions formally,” Pityana said. “That’s not how the law works.”

This is a chilling admission. If regulators can sidestep legal processes, inventing rules as they go, what stops them from arbitrarily destroying careers, reputations, and businesses?

Perhaps the most disturbing revelation was that the Sarb’s PA might not face any consequences for its unlawful behaviour. “I feel vindicated. I feel confident in our Constitution, in our legal system, and in the independence of our courts,” Pityana said. “But I also feel resentful that there doesn’t seem to be any consequence management for the leadership at the Reserve Bank who acted this way. If left unchecked, they are capable of doing this to someone else.”

This lack of accountability is a recurring theme in South Africa’s financial sector. Regulators act with impunity, boards capitulate to unlawful demands, and ordinary professionals pay the price.

The court’s ruling has set a crucial precedent: Boards of financial institutions must exercise independent judgment and cannot blindly obey unlawful instructions from regulators. “Every board of a financial services institution and every executive must read this judgment carefully,” Pityana insisted. “It makes it clear that you have a duty to adhere to the law, not just to please the regulator. You must select directors in line with both the Companies Act and the Banks Act.”

He delivered a scathing indictment of boards that buckle under pressure: “Boards cannot simply comply with unlawful directives from the Reserve Bank. It’s not enough to say you don’t want to offend the regulator. Doing so is a dereliction of your legal duty.” This is a direct challenge to corporate South Africa: Will boards now stand up to regulators, or will they continue to enable unlawful behaviour?

Absa’s board, which removed Pityana based on the PA’s unlawful objections, now faces its own reckoning. “The Absa Board removed me from the board based on the Reserve Bank’s objection,” Pityana said. “But now that the court has ruled the Reserve Bank acted unlawfully, the Absa Board must answer publicly whether they still believe removing me was justified.”

He confirmed that legal action against Absa was forthcoming. “I am taking them to court over this. They opposed my legal action initially, citing the Reserve Bank’s involvement. But now that the court has found the Reserve Bank acted unlawfully, the Absa Board must explain why they still believe my removal was appropriate — and on what grounds.”

Pityana was adamant that the PA must face real accountability. “First, the Reserve Bank should issue a public apology,” he said. “Given the embarrassment caused by this ruling, they should acknowledge their wrongdoing and commit to not repeating it.”

But an apology will not be enough. Parliament must step in. “Second, Parliament has an oversight responsibility. They must ensure the Reserve Bank accounts for its conduct in this matter. Why did they act outside the law? Did they understand the severity of their actions?” Without consequences, Pityana warned that this would happen again.

This case is about more than one man’s vindication — it is about whether South Africa’s financial sector operates under the rule of law or the whims of unaccountable regulators. As Pityana aptly summed it up: “This judgment is a win not just for me, but for the integrity of our financial system and the rule of law in South Africa.”

Three critical lessons emerge:

• Accountability: The SARB must answer for its unlawful actions
• Rule of Law: Banks and regulators are not above the law
• Board Independence: Directors must resist unlawful pressure, even from regulators.

The question now is: Will anything change? Or will the financial sector continue to operate as a law unto itself? One thing is certain — Pityana’s fight has exposed the rot. The next move belongs to those who claim to uphold justice.

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