Covid-19: Block exemption for the banking sector

Government is allowing banks to collude. But this for the greater good.

Minister of Trade, Industry and Competition Ebrahim Patel published regulations (Government Gazette No 43127) on March 23 outlining details of a block exemption protecting the banking sector – including banks, the Banking Association of South Africa (Basa) and the Payments Association of South Africa (Pasa) – from the application of Sections 4 and 5 of the Competition Act.

The purpose of the exemption is to strengthen the government’s programmes designed to fight Covid-19 under the National State of Disaster declared on March 15, and to “alleviate, contain and minimise” the negative impact on banks and their customers, that is, businesses and private individuals.

It is intended for banking customers to be in a position to continue normal operations beyond the national disaster.

Prior to these regulations being issued, these sections prohibited horizontal and vertical practices; for example, an agreement between firms that will lessen or prevent competition in the market, or fixing a price or trading condition.

Block exemption

A block exemption has been provided in respect of agreements or practices that are undertaken at the request of, or in coordination with, the minister (Patel) or the minister of finance for the sole purpose of responding to the Covid-19 pandemic. Communication and agreements in respect of prices are excluded unless specifically authorised by either minister.

The following agreements or practices are exempted

1. Payments system

Agreements or practices that have the sole purpose of ensuring essential payment systems should continue to operate in this period, and are limited to the development of industry monitoring, operational policies and contingency plans in respect of:

• The continued availability of bank notes to ATMs, branches and businesses
• The continued provision of essential ATM, branch and corporate banking services, and
• The continued provision of electronic payments systems.

2. Debtor and credit management

Agreements or practices that have the sole purpose of ensuring that the management of debtors and extension of credit should continue during this period, and are limited to the development of industry policies and monitoring in respect of customers subject to financial stress:

• Payment holidays and debt relief,
• Limitations set on asset repossessions, and
• Extension of credit lines

These regulations may be expanded or reduced by the minister by notice published in the Government Gazette.

Where the banking sector identifies additional agreements or practices not included in these regulations, it may request the minister to expand the scope of the exemption.

Minutes of meetings held and written records of any agreements or practices that fall within the scope of these exemptions must be kept by the banks, Basa and Pasa.

Written representations on these regulations may be made by any person, and must be submitted to [email protected], within 14 days from March 23.