Co-operative Banks

A Co-operative bank is a co-op (as defined in the Co-operatives Act 2005) whose purpose is to be a bank, and the members of which have a common profession or occupation, or have a common membership in an association or organisation.

There is also a new type of institution known as a ‘co-operative financial institution’. This is a co-op which, specifically, takes deposits – an informal savings collective of which a typical example is the stokvel. It is obliged to use names like ‘Financial Co-operative’, ‘Credit Union’, ‘Savings and Credit Co-operative’.

The position is governed by the Co-operative Banks Act 2007.

A. Registration

  1. It is an offence for any person who is not registered as a co-operative bank to:
    • use or refer to himself by any description or symbol indicating that he is a co-operative;
    • purport to be a co-operative bank; or
    • use any description that includes the expression ‘co-operative bank’ or ‘co-op bank’.1
  2. The same applies to conduct regarding a co-operative financial institution.2

  3. It is an offence for any person who is not registered as a co-operative bank to conduct the business of any co-operative bank.3

  4. The same applies to conduct regarding a co-operative financial institution.4

  5. A co-operative bank may not provide, participate in or undertake banking services other than those authorised in respect of its type of co-operative bank.5

  6. The same applies with regard to a co-operative financial institution.6

  7. Any person who provides false information in connection with an application for registration as a co-operative bank commits a crime.7

  8. It is a crime for a co-operative bank, or any representative body or support organisation of co-operative banks, or any other person to submit a document or information or make a statement that is false or misleading.8

B. Names

  1. All co-operative banks must have the words ‘co-operative bank’ or ‘co-op bank’ as part of their name.9

  2. A co-operative bank must set out its name in legible characters on any statement, notice or advertisement, and must indicate which type of co-operative bank it is.10

  3. A co-operative bank may not use a name other than the name under which it is registered, or any literal translation or abbreviation of such name (unless approved by the Prudential Authority).11

C. Reckless trading and lending

  1. Any director or executive officer of a co-operative bank who, directly or indirectly, is involved in the management of a co-operative bank while the business of the co-operative bank is carried on for any fraudulent purpose, or recklessly and with intent to defraud anyone’s creditors, commits a crime.12

  2. Any person (other than a director or executive officer) who, directly or indirectly, benefits from or is involved in the management of such a co-operative bank also commits a crime.13

  3. If a co-operative bank is unable to meet or maintain minimum capital, asset quality, liquidity and surplus reserves requirements it must immediately report this and the reasons therefor to the Prudential Authority.14

  4. A co-operative bank may not, without the approval of the Prudential Authority, make an investment with any one person, or grant a loan to any one member (including persons or members directly or indirectly controlled by the same person or member, or who are so interconnected that financial difficulties of one will affect the liquidity of another) which, whether alone or together with all previous investments or loans made or granted to that person or member, will exceed the allowable percentage as prescribed by the Minister of Finance.15

D. General

The Prudential Authority established in terms of the Financial Sector Regulation Act can issue directives for co-op banks and co-op financial institutions to take certain steps or conduct. It is an offence not to comply with such directives.16

  1. Section 77(1). 

  2. Section 77(1). 

  3. Section 77(2). 

  4. Section 77(2). 

  5. Section 77(3). 

  6. Section 77(3)(b). 

  7. Section 78. 

  8. Section 80. 

  9. Section 10(2) read together with section 80. 

  10. Section 10(3) read together with section 80. 

  11. Section 10(4) read together with section 80. 

  12. Section 79(1). 

  13. Section 79(2). 

  14. Section 21(1) read together with section 80. 

  15. Section 23 read together with section 80. 

  16. Section 80(a).