South African Central Bank Governor Kganyago Wants More Banks

(Bloomberg) -- The South African Reserve Bank, having handed out the first three bank licenses in 11 years, is keen to see more entrants into the industry to drive down costs for consumers.

This year has seen Discovery Ltd., the nation’s biggest health-insurance administrator, start a bank at the same time as TymeDigital, a company backed by South Africa’s only black billionaire. Bank Zero, which is owned by the former chief executive officer of FirstRand Ltd.’s First National Bank, has a provisional license for his Bank Zero, with plans to start operation2 by the end of this year.

All the newcomers operate on digital platforms that allow them to tightly control costs and keep fees low. These challenger banks will be going head-to-head against the nation’s five largest lenders, including FNB, Standard Bank Group Ltd., Nedbank Group Ltd. and Absa Group Ltd., who between them control more than 90 percent of banking assets in the country.

“The preference is for more entrants because that brings down the cost of banking,” Lesetja Kganyago, the central bank governor, told editors at a lunch in Johannesburg on Thursday. “We have got a concentrated industry.”

There will be no preferential treatment for the challengers, he said. They will need to comply with banking rules and will be policed as carefully as their more established competitors, even though they are using new technology, Kganyago said.

“The debate elsewhere in the world is whether these technology companies should be allowed to operate in the banking space,” he said. “Our attitude is ‘yes they should be, but then they have to play by the rules.’ You can’t want to conduct the business of a bank without playing by the rules.”

The new entrants might also find themselves the target of takeover bids if they are too successful, the governor said.

The big banks may well say “ok, so you eat my lunch, then I eat you,” Kganyago said.

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