Parliament must probe the methodology into bank account closures.
In the spotlight is the metric of reputational risk and there are claims that South Africans rights are being violated.
Reputational risk modelling is not currently transparent or fair, nor does it have a just mechanism of recourse. It is also not standardised globally. Worst of all, the metrics are applied unfairly leading to discrimination.
The issue was highlighted this month after Nedbanks 2023 Annual Report revealed it had unbanked nearly 200 people on this unquantified, undisclosed metric.
Nedbanks Pillar 3 Risk and Capital Management Report for the year ended December 31, 2023 revealed it is now considered as one of the banks top ten risks and has subsequently been included on its risk scorecard.
Financial Sector Conduct Authority (FCSA) commissioner Unathi Kamlana, in a speech at the Banking Association of South Africas Banking on Ethics Conference last week, raised concerns on closing bank accounts on the metrics of reputational risk.
He said, However, some of the actions of the banks which have been particularly contentious in this area of anti-money laundering and countering the financing of terrorism recently pertain to the closure of bank accounts for reputational risk reasons. This is an issue that relates directly to the principles of ethics, fairness, and inclusion.
It is vital that the government legislates clear, transparent guidelines. It cannot be left to banks to unilaterally apply this secret modelling, which is subjective, to targeted individuals. The modelling itself must apply to both bank license holders as well as their clients in the interest of fairness and transparency. It cant be one rule for customers and one other rule for banks because that is not fair.
Thus within transparent reputation risk modelling in the public domain, banks should equally have the law applied to them, not just bank clients.
It is very surprising that political parties from the ANC, to the DA and EFF are not on the warpath on this issue.
The scant reading that I have done on the issue is giving me insomnia over how powerless people are against the banks on this issue. It is blatantly unfair, unconstitutional and violates South African consumer rights.
This is compounded by the very fact that banks have trillions of rands to spend on lawyers, whereas the average person is barely making ends meet so justice is out of their reach.
Why is this so unfair? The banks argue, that by contract law, that when a customer opens a bank account he or she is subject to fine print that clearly states they have the right to cancel an account under certain circumstances.
This was upheld in a landmark case Bredenkamp and Others v Standard Bank of SA, which ruled on the banks right to cancel the contract between it and its customer unilaterally.
However, South African banks are currently over-reaching their mandate after Africas most industrialised nation was grey listed for lack of proper controls against corruption, money laundering and terrorist funding.
Local banks are having a torrid time. The complexity and cost of this is hectic. Not only that. They have had to deal with South Africas sovereign rating being placed on junk, which affects lenders ratings.
Being grey listed, compounded by a credit rating cut, makes it more expensive to borrow money and harder to transact internationally.
In response, banks have gone risk adverse. But they are taking this too far. The risk metric of reputational risk is hard to quantify, so banks are saying it is their right to terminate your account based on public perception.
This is why I reached out to Dr Iqbal Surv, the chairman of and the Sekunjalo Group, to ask him about his experience with Nedbank trying to terminate the accounts of companies held by Sekunjalo on the basis of reputational risk.
is owned by and for the sake of transparency my salary too is dependent on Independent Medias bank accounts being open.
I asked Nedbank for information on the methodology of reputational risk, and if it was evenly applied across its active 7.3 million clients and they gave a blanket, rubbish answer.
Nedbank is bound by client confidentiality and is unable to discuss clients with third parties, it said.
However, I did not ask about their clients. I asked about a clearly quantifiable metric standard that can be audited, which should be publicly available so that it is not abused, arbitrarily levelled or used as a political tool to take down individuals banks one might have a beef with.
This is a glaring, abusive gap in regulation and it is absurd and outrageous.
I asked Dr Surv, Did the legal team ask how Nedbank qualified reputational risk/ methodology?
Surv said, These are really good questions to all the banks. That is exactly what we have asked the banks and they
