It was found that local banks had no direct exposure to the sub-prime mortgage market, while certain of the banks’ international franchises had only limited exposure. However, indirect effects, such as increased funding costs, were observable.
In view of the developments in financial markets and specific events in some international banking institutions, the Bank deemed it important to embark on a process to evaluate the appropriateness of South African banks’ incentive schemes during 2008. A major change to the South African banking regulatory and supervisory framework occurred as a result of the implementation of Basel II on 1 January 2008.