Rand strong,another reason why:
Govt decision on Absa soon
Apr 04 2005 03:11:02:180PM Ray Faure
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Johannesburg - The government's decision on whether to give its blessing to UK bank Barclays plc's bid for a majority stake in local bank Absa is expected soon, with some speculating that it could even be as early as this week.
"It's going to be sooner rather than later. It can't take forever," a source close to the deal said on Monday.
This comes after what was described as an "exploratory" meeting between the two banks and Finance Minister Trevor Manuel and Reserve Bank Governor Tito Mboweni at the weekend.
Barclays has applied for regulatory approval to acquire a majority shareholding, of more than 49% but less than 74%, of Absa and such a transaction requires the consent of the finance minister.
"Pursuant to the receipt of the recommendations of the Registrar of Banks and the competition commission, the minister has considered material aspects of the proposed transaction," the National Treasury said in a statement.
The statement added that the meeting, held on Sunday morning, was exploratory and the outcome non-binding in nature.
The discussions included an evaluation of conditions under which such an acquisition may be permitted, taking into account the requirements of the Banks Act, ongoing maintenance of the soundness of the South African financial system and prevailing policy objectives.
No decision regarding regulatory approval will be made until such time as the representatives of Absa and Barclays have reverted to the minister on these matters, the statement said.
Public interest
The minister, in granting such approval, must be satisfied that the proposed acquisition will not be contrary to public interest, as well as the interests of the depositors, bank, and controlling company involved.
Sources close to the deal said that, to speed up the process, the parties were likely to come back as soon as possible to the minister on any outstanding issues.
What the conditions were that the Treasury was alluding to is not exactly known, but SARB Governor Tito Mboweni is on record as saying that any deal involving a takeover by a foreign bank would have to rest on the government's four-pillar policy.
Also, each application would have to be examined on a case-by-case basis and the supervisory regime would have to follow the internationally agreed framework of "home-host" banking supervision.
In reference to the latter, he says 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.
Barclays has made it clear that it will not make a formal offer for Absa until it has the necessary regulatory approvals.
A controlling stake in the South African bank is likely to be costly.
With Absa's share price having rocketed from around R60 to over R75 a share since news first leaked that the two banks were in talks, it's speculated that the deal is likely to cost more than R25bn.
Should the Barclays deal succeed, it will likely pave the way for other foreign players such as Standard Chartered, which has made no bones about wanting to become a major player in South Africa, to pursue a major acquisition here.
