Page 177 - SARB: 100-Year Journey

Financial stability and the global financial crisis
Marcus came into the SARB at a time when the financial stability debate was taking hold. Therefore, “her particular set of interests was primarily around that issue, trying to ensure that we institutionalised the financial stability concerns in the work of the Bank,” Guma said.
Kganyago, whose appointment to the SARB was the ‘best- kept secret’ in South Africa, concurs. He had to keep the news under wraps for months and joined the central bank only after having completed work on the 2011 Budget, his core responsibility at the time as National Treasury Director- General. One of the first conversations he had with Marcus in 2010, before his appointment was announced, pertained to his portfolio as Deputy Governor.
According to Kganyago: “She said that she would like me to take care of financial stability, bank supervision and financial surveillance. She said, ‘Those are the big policy functions but you will have to have your share of the support functions.’ From around November 2010, [I had to be] quiet all the way until after the Budget in February.”
When he got to the SARB, Kganyago called on all the relationships he had built while at the National Treasury with other institutions, including at the fiscus, the Financial Stability Board and the erstwhile Financial Services Board (now the Financial Sector Conduct Authority).
That resulted in the constitution of the Financial Regulatory Steering Committee chaired by Kganyago, as SARB Deputy Governor. The committee included National Treasury Deputy Director-General Ismail Momoniat, and Financial Services Board CEO Dube Tshidi.
“That troika ... established work streams to work on different areas of regulatory reforms because we already had the policy,” Kganyago said.
Around that time, Marcus began the search for another Deputy Governor following the departure of Guma, who had put in 16 years of uninterrupted service at the SARB. Groepe, an unusual recruit in that he did not have a traditional economics background, was appointed in 2011 and began working at the central bank in 2012.
Groepe, a former media CEO, explained Marcus’s reasoning thus: “There was particular expertise required in terms of the operations of the Bank, particularly in the currency area. The subsidiaries, at that stage, were somewhat loss-making. She [Governor Marcus] wanted somebody with deep management expertise and experience to assist. Typically, most of the governors are trained economists, [who] ... come with certain skills, but don’t necessarily [have] experience of nitty-gritty operational issues.”
Groepe also worked with Kganyago on the financial sector reforms. “It was Lesetja, Momo and Dube. I worked alongside Lesetja. It was phenomenal because there was a concerted effort to go and look at global perspectives. They had considered different models,” said Groepe of the time.
However, “I don’t think it’s Twin Peaks. It’s triple peaks, because the Twin Peaks we talk about are prudential and market conduct. But I see prudential as separate from financial stability, because prudential is microprudential, and financial stability is macroprudential,” he added.
During her time, Marcus often highlighted the SARB’s broadened mandate of financial stability as a strategic focus. At the 92nd Ordinary General Meeting held in July 2012, Marcus told shareholders: “This broadened mandate has ... resulted in a reconstitution of the Bank’s Financial Stability Committee as a policymaking body.”
“The Bank has continued its participation in the deliberations on banking regulatory reform in the Basel Committee on Banking Supervision. Amended regulations relating to banks were implemented in January and progress has been made with respect to the planned phasing in of the Basel III regulatory framework at the beginning of 2013,” she continued.
According to Marcus, the financial stability mandate for central banks had been implicit and was related to the institutions’ function as lender of last resort and their liquidity provisions during times of crisis. “[There] has been a convergence in thinking in the wake of the crisis ... that low inflation is not enough to ensure financial stability,” Marcus said.
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