Reserve Bank independence must be protected, says SA Banking Association

It is in the interest of all who bear the brunt of financial instability that the independence of the Reserve Bank be protected, says the banking association.

The Banking Association South Africa (BASA) said on Friday that it had noted statements made during the  African National Congress (ANC) National Policy Conference about the South African Reserve Bank (Sarb).

This comes after the chairperson of the ANC’s economic transformation commission, Enoch Godongwana, said the party had resolved to keep the bank independent, but to investigate the possibility of changing its ownership.

The issue of the independence of the Reserve Bank has come under close scrutiny since public protector Busisiwe Mkhwebane last month ordered remedial action directing parliament to effect a constitutional amendment to the powers of the bank, from targeting inflation to promoting economic growth.

Mkhwebane criticised Sarb for failing to recover R1.125 billion from Bankorp Limited/Absa Bank that was advanced as an “illegal gift” to the Bankorp group, which was bought by Absa in the early 1990s.

The public protector made her assertions while releasing the report on Sarb’s alleged failure to recover “misappropriated funds” in the erstwhile Bankorp lifeboat investigation.

BASA said in a statement that it was in the interest of all South Africans, particularly the poorest of the poor, who bear the brunt of financial instability, that the independence of the Reserve Bank be protected.

“While the shareholding of the Reserve Bank is not a critical issue, the independence of the bank is of paramount importance. The Reserve Bank is South Africa’s central bank, and it plays a vital role in formulating and implementing monetary policy, supervising the banking system and managing reserves,” BASA said.

“The Reserve Bank is the lender of last resort and able to provide liquidity to the market in the event of financial shocks. As such, it is fundamental to maintaining confidence in our country’s financial system and the South African economy as a whole.”

BASA said the role of the Reserve Bank and its independence were protected by the constitution, and it was crucial that this independence be preserved.

The Reserve Bank’s current mandate has been to maintain price stability and to enable growth.

“This mandate and the inflation targets are decided in consultation with government, but the instruments to achieve these are decided independently whether most Reserve Bank shares are held by the state or by private individuals should have no bearing on this,” BASA said.