1. Competition Commission comments to Parliament on the Co-operative Banks Bill 28 August 2007

2. Outline Competition in the banking industry Competition in the banking industry Determinations/appointment of supervisors Consequent amendments to the National Payment System Act Limitations on primary co-operative banks Amalgamations and merger control

3. Competition in the banking industry SA banking services largely dominated by the big four banks Serious need for accessible and affordable banking services in South Africa Co-operative Banks Bill generally laudable  Entry of alternative banking services providers  Possible betterment of consumer welfare Challenge: lowering the entry & operational barriers

4. Appointment of supervisors Supervisor administers registration applications of co-operative banks  Advantage: allows for effective administration of the Act potential hindrance: section 8(2) of the Bill  No clear criteria to guide supervisor in fulfilling his/her role Guard against opaque conditions that may hamper growth of co-operative banks

5. Consequent amendments to the NPS Act No reference to primary cooperative banks in the Consequent amendments to NPS Act  Implication: primary cooperative banks precluded from participating in clearing and settlement services?  Primary cooperative banks to only offer transaction services on its own infrastructure?

6. Limitations on primary cooperative banks Lack of clarity on the manner of facilitating payment activities of primary cooperative banks with reference to Section 14(1)(b) of the Bill Offering transaction services only on its own infrastructure may:  limit the scope of payment services that primary cooperative banks can provide to members  potentially limit its ability to compete effectively

7. Amalgamation and merger control Competition Commission regulates all mergers captured under Chapter 3 of the Competition Act 89 of 1998 Competition Commission to scrutinize merger activities between cooperative banks if captured under Chapter 3 of the Competition Act Concurrent Jurisdiction: Competition Commission to liase with Minister of Finance and Supervisor

8. Conclusion Competition Commission supports theCompetition Commission supports the objectives of the Cooperative Banks Bill Establish clear and objective criteria to guide Supervisor in considering registration applications of cooperative banksEstablish clear and objective criteria to guide Supervisor in considering registration applications of cooperative banks Clarify rights and obligations of primary cooperative banks in respect of clearing and settlement servicesClarify rights and obligations of primary cooperative banks in respect of clearing and settlement services Amalgamations: need for Competition Commission, supervisor and Minister of Finance to liase effectivelyAmalgamations: need for Competition Commission, supervisor and Minister of Finance to liase effectively