South Africa is preparing for one of its biggest financial regulation shake-ups in decades.
𝗜𝘁’𝘀 𝗰𝗮𝗹𝗹𝗲𝗱 𝘁𝗵𝗲 𝗖𝗢𝗙𝗜 𝗕𝗶𝗹𝗹
It will completely overhaul how every financial institution operates, from Banks and Insurers to Fintech and Crypto companies.
𝗙𝗶𝗻𝗱 𝗢𝘂𝘁 🔻
1/ Back Story
𝗧𝗵𝗲 𝗖𝗢𝗙𝗜 𝗕𝗶𝗹𝗹 𝗶𝘀 𝗮 𝗸𝗲𝘆 𝗽𝗶𝗹𝗹𝗮𝗿 𝗼𝗳 𝗦𝗼𝘂𝘁𝗵 𝗔𝗳𝗿𝗶𝗰𝗮’𝘀 𝗧𝘄𝗶𝗻 𝗣𝗲𝗮𝗸𝘀 𝗿𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗺𝗼𝗱𝗲𝗹, designed to create one unified, streamlined framework for overseeing how all financial institutions conduct themselves.
The reform process started with a policy paper around 2014, and by 2017 the Financial Sector Regulation Act (FSR Act) was enacted, officially establishing the two new regulators that underpin the system:
The Financial Sector Conduct Authority (FSCA) is leading the charge on South Africa’s Conduct of Financial Institutions Bill (𝗖𝗢𝗙𝗜 𝗕𝗶𝗹𝗹), which will overhaul the country’s market-conduct rules for financial institutions.
Let me explain the difference between RSA Retail Savings Bonds and tradable South African bonds.
𝗙𝗶𝗻𝗱 𝗼𝘂𝘁 🔻
** Glossary **
𝗕𝗼𝗻𝗱:
A bond is a debt security. You can think of it as an I-O-U.
You lend money to someone, and then they promise to pay that money back to you + interest.
𝗠𝗮𝘁𝘂𝗿𝗶𝘁𝘆:
Refers to the date on which the bond issuer (debtor) pays back everything they owe to bondholders ( creditor ).
1/ Introduction
When it comes to bonds there are two markets one can opt to participate in:
🟠 The Primary Market
🟠 The Secondary Market
The primary market is where you 𝗯𝘂𝘆 𝗶𝘁 𝗱𝗶𝗿𝗲𝗰𝘁𝗹𝘆 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝗴𝗼𝘃𝗲𝗿𝗻𝗺𝗲𝗻𝘁 but then cannot sell it to someone else because there is no secondary market for it.
𝗥𝗲𝘁𝗮𝗶𝗹 𝗦𝗮𝘃𝗶𝗻𝗴𝘀 𝗕𝗼𝗻𝗱𝘀 𝗮𝗿𝗲 𝗻𝗼𝘁 𝘁𝗿𝗮𝗱𝗲𝗱 𝗼𝗻 𝘁𝗵𝗲 𝘀𝗲𝗰𝗼𝗻𝗱𝗮𝗿𝘆 𝗺𝗮𝗿𝗸𝗲𝘁 and this is what makes them different from tradable government bonds.
𝗢𝗽𝗽𝗼𝘀𝗶𝘁𝗲 𝘁𝗼 𝘁𝗵𝗮𝘁,
Tradable government bonds have a secondary market where they can be traded or held to maturity.
This means you can sell it when you want to, but it also means you can potentially lose money if the bond price has fallen lower than your original purchase price.
With tradable government bonds, you are 𝘀𝘂𝗯𝗷𝗲𝗰𝘁𝗲𝗱 𝘁𝗼 𝗶𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗿𝗮𝘁𝗲 𝗿𝗶𝘀𝗸.