It would appear that the Financial Services Charter has achieved an optimal balance in that it acknowledges the importance of a stable and growing financial sector and supports principles that will promote and enhance the quality of decision-making, the South African Reserve Bank (SARB) says.

In its annual review of the country's banking sector, the SARB's Bank Supervision Department says that the financial sector has been proactive in responding to the need for change in South Africa. But, it cautions that although one might argue that change at too slow a pace may destabilise the sector, change at too great a pace might pose an ever greater threat to financial stability.

It adds that although government is responsible for establishing the framework within which the banking industry operates, cognizance has to be taken of the implications of the pace of change in the financial sector.

The central bank points out that although the charter was released amid concerns that it might affect banking profits and dilute shareholdings, the response has largely been positive.

This, it says, might be attributed mainly to the charter constituting the outcome of a voluntary initiative by the major institutional players in all material facets of the financial sectors, as well as black professionals and black business.

"In general, it is believed that the Charter sets reasonable black economic empowerment (BEE) objectives, albeit ambitious in some quarters, without sacrificing financial soundness or unduly increasing risk in the banking sector.

"It has to be acknowledged, however, that Government and regulatory authorities have a role to play before industry can effectively pursue the specified targets.

"Therefore, regulators now have to grapple with some fundamental arrangements that need to underlie implementation of the Charter, as well as consider the role of the Charter in the regulatory framework and assess whether it is capable of satisfying the demands of the relevant stakeholders within the specified time frames," the review states.

It adds: "The Bank Supervision Department is fully committed to the objectives of the Charter. Progress towards and achievement of these objectives could meaningfully contribute to the stability and growth of the financial sector in the long term."

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