This is already in operation in that South African-owned banks have a presence abroad and internationally-owned banks have a presence in South Africa. The success of such a system relies largely on both the home-country and the host-country regulator ensuring compliance with the Basel Core Principles for Effective Banking Supervision and the various guidelines flowing therefrom.
The recognition of this public good property underpins the recent emphasis on a macro-prudential approach to regulation and supervision. From a micro-prudential perspective, a strengthened supervision of individual institutions’ risk-taking incentives is also important.