SA’s banking sector dominated by five large banks: Report

South Africa still has a concentrated banking sector with the dominance of five large banks which collectively hold 90.5% of the total banking sector assets as of March the 31st 2019.

This is according to the Prudential Authority Annual 2018/19 report released on Thursday, in Rosebank, Johannesburg.

Local branches of international banks account for 5.6% of banking sector assets and 4% for other banks.

Responding to the report, Reserve Bank Governor, Lesetja Kganyago, says the 2002 banking crisis resulted in the concentration of banks in the country.

Kganyago says in 2002, they had to exit about 50 banks from the system as a result of that crisis because they couldn’t cope.

“And I think I share Deputy Governor’s optimism (that) there will be more competition in the South African banking sector. And that is because unlike other countries, we had not experienced that banking crisis and that has provided for other players to enter. If you are Swiss, you have moved from having three pillars to two pillars in the banking system. I don’t think there has been a new bank license in the US in the past 10 years. We are, in the meanwhile, processing new banking applications and that is very positive from our perspective,” says Kganyago.

New banking licenses on the increase 

Meanwhile, the Prudential authority says it has seen a notable increase of black people and organisations applying for new banking licenses.

Chief Executive Officer of the Prudential Authority Kuben Naidoo told the media that several of the newly licensed banks licensed have significant black ownership.

The Authority is responsible for regulating, banks, co-operatives, insurance companies and other financial institutions.

Naidoo says he is optimistic this will change within the next two to ten years.

“We are part of the financial sector council and we do use the financial sector charter as a benchmark to assess how banks are making progress in transformation. Transformation is not only about ownership, it’s about staff; it’s about training; it’s about management, the value chains and how they are integrating small and black businesses into those. So it’s part of the things we look at even though it’s not our primary mandate in that regard.”