It is safe to say there has been an unprecedented influx of legislation since the declaration of Covid-19 as a pandemic which resulted in South Africa invoking the Disaster Management Act. This has required the amendment of regulations to accommodate action and measures to be taken during this time, resulting in the ongoing review, amendment to and publication of new legislation.

Financial Services Industry

Regular communications have been sent out by the Financial Services Regulators, detailing amendments of directives and issuing guidance notes to guide the industry at this time, acknowledging the impact on financial soundness. To this end, these have outlined some of the regulatory and supervisory actions that the Regulators are implementing to alleviate some of the stress caused by Covid-19.

Regulators such as the Prudential Authority have urged providers to communicate with them, promising to assess challenges on a case-by-case basis.

The Financial Sector Conduct Authority and the Prudential Authority have issued a joint directive on precautionary measures to reduce the risk of exposure, transmission and the spread of Covid-19 by communicating the measures that financial institutions need to take. These include maintaining a register of the names and contact details of all staff working on site, and who have been attending meetings, for at least one month to assist with contact tracing in line with Chapter 3 of the Regulations.

Financial institutions must also develop and implement an infectious disease preparedness and response plan that can help guide protective actions against Covid-19. This must include plans and polices aimed at compliance with issued directives.

Many Banks have taken the initiative to provide payment holidays as relief to clients during this period of financial stress. These are not profit driven but guided by risk management principles to minimise the adverse economic impact.

Guidelines have also been issued for Banks to consider, in their classification and measurement of exposures and expected credit loss provisioning, for:

• Payment holidays and restructured credit exposure
• Government and other assistance
• Macro-economic models
• Loan modifications.

The Prudential Authority are of the view that valid reasons do exist to extend the period of compliance regarding specific reporting requirements and extensions have been granted with regards to annual financial statements and audit reports.

The Prudential Authority and the South African Reserve Bank (SARB) have acknowledged that the difficult operating environment can no longer be regarded as business as usual.

The scale of insurance claims as a result of Covid -19 is still unclear although severe potential impacts have already been identified and it is expected that insurers will experience an increase in claims across various aspects from business to life risk and funeral policies.

Regulators have also called on insurers to consider how they can provide premium relief or any other mechanisms which can assist policyholders, while maintaining sound risk management and governance practices.

Authored by Karmil Govender BA.LLB MDP (Compliance), Industry Compliance Author, LexisNexis South Africa