Abstract:
The financial crises of the past have proven that prudent and effective systems of bank
regulation are crucial in preserving and maintaining a resilient financial system. Banks
play a significant role in the economic environment and their stability and soundness
is imperative to prevent financial crises. Changes in the market and developments in
banking practices have increased the risk exposures of banks. Through the contagion
effect, the failure of one bank may have far-reaching consequences for other banks
and the financial system as a whole. Essentially, enhanced and effective banking
regulation is pertinent to safeguard the financial system.
As a regulatory response to these financial crises, capital and liquidity requirements
of banks have been developed and adopted internationally, over the years, with the
purpose to preserve the integrity of the global financial system. These frameworks of
international banking regulation have been adopted through the Basel Accords, which
are premised on strengthening the resilience of banks to withstand financial pressures.
The 2008 Global Financial Crisis prompted the need to revise the previous regulatory
instruments, resulting in the introduction of the latest international regulatory
framework known as Basel Ill. In South Africa, these international standards of
banking regulation have been transposed into the relevant legislative instruments
regulating banks in a proactive effort to enhance and preserve the stability of banks.
This dissertation discusses the aspect of bank regulation and how prudential
regulation, as a regulatory tool, contributes to the promotion of financial stability. The
study critically discusses the capital and liquidity requirements of banks as set out in
the Basel Accords and analyses their ability, as mechanisms of prudential regulation,
to preserve a resilient financial system.
The dissertation further considers how these international standards of banking
regulation have been adopted into South African law. This is done by considering the
legislative and regulatory instruments regulating banks and the role of the South
African Reserve Bank in facilitating compliance by banks.
