Following extensive engagement by the FIA, National Treasury has made proposals to reduce the levies that intermediaries will pay to the FSCA in terms of the Financial Sector and Deposit Insurance Levies Bill.
Since 2014, the FIA has been actively involved in engagements on what was originally the Draft Financial Sector Levies Bill. The purpose of this Bill is to give effect to the Twin Peaks model of Regulation, i.e. the Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA). The Bill proposes levies payable by all entities supervised by the FSCA and/or PA to enable the implementation of these changes.
There have been several iterations of the Bill, all of which imposed very high increases to the annual levies payable by FSPs to the FSCA, as well as a two-year special levy, specifically designed to fund the financial sector regulators.
In 2020, with the advent of Covid and its associated impact on intermediary businesses, the FIA ramped up its engagements with the FSCA and National Treasury regarding our concerns relating to the impact these increases will have on ALL intermediaries, in particular small businesses.
In February 2021, National Treasury issued an updated draft of the Bill and the FIA was heartened to see a 50% reduction in the two-year special levy from 15% to 7.5%; however, the ongoing levies, remained as they had been proposed in previous versions. The FIA made its submission to National Treasury in March 2021 and once again noted the severe economic impact of the proposed levies on intermediaries. It was also highlighted that those high levies are a barrier to new entrants to the market and the transformation agenda in general. The other point that we raised was the issue of dual regulation in the medical schemes space and the further cost burden that this creates for Healthcare intermediaries.
National Treasury then issued an updated version of the Bill which included deposit insurance, in December 2021 (The Draft Financial Sector and Deposit Insurance Levies Bill). While the press statement indicated that Treasury had taken all comments in respect of the February version into account, both the special levy and the FSP levies remained the same, with minor exceptions.
The FIA hosted a meeting with the FSCA and National Treasury on 1 February 2022 in which our concerns were again raised and it was agreed that the FSCA finance team would go back and review the figures, to assess appropriateness and fairness. A formal submission was again made by the FIA on 7 February 2022 and submitted to National Treasury.
On 11 May 2022, the FIA made representation in Parliament to the Standing Committee on Finance in relation to National Treasury’s responses to the submissions received in respect of the Levies Bill. The FIA again made clear the punitive nature of the levies in a tough economic climate, especially on small businesses and new entrants to the market, and the Standing Committee requested that National Treasury provide them with an impact assessment on both consumers and small businesses.
Further engagements then took place between the FIA, National Treasury and the FSCA on 13 May 2022, and during the deliberations of the Standing Committee on Finance on 18 May 2022, National Treasury tabled proposals to reduce both the base and variable levy payable by intermediaries, and increase the maximum cap, thereby providing significant relief to smaller and medium sized business.
Treasury announced the following changes to the formulae used to calculate the levies payable to the FSCA in terms of Schedule 2, Table B.
Category I and Category IV FSPs
- The base levy decreases by 10%, from R4 000 to R3 600
- The levy per representative/key individual decreases by 16.1%, from R620 to R520
Category II, IIA and III FSPs
- The base levy decreases by 6.25%, from R8 000 to R7 500
- The levy per representative/KI also decreases from R620 to R520
Category I or Category IV FSPs: long-term insurance sub-category A or friendly society benefits
- The base levy decreases from R4 000 to R3 600
- The representative/KI levy decreases from R280 to R250
Table B included a category labelled “Financial Services Provider (other)”, which will be removed.
The FIA welcomes these proposals from National Treasury and the FSCA. Our mandate is to protect intermediary businesses and I want to congratulate our Head of Legal and Compliance – Sam Williams and members of the FIA that accompanied the FIA on these deliberations with National Treasury and the FSCA.