[Regulation 38(16) heading substituted by regulation 22(aaa), of Notice No. 297, GG 40002, dated 20 May 2016]
(16) Matters related to the repayment of capital and specified reductions in reserve funds
| (a) | A bank shall not without the prior written approval of the Registrar or otherwise than in accordance with conditions approved by the Registrar in writing— |
| (i) | repurchase any shares of which the proceeds qualify as common equity tier 1 capital; |
| (ii) | repay any proceeds received from the issuance of shares or instruments qualifying as additional tier 1 capital; |
| (iii) | before the maturity thereof, redeem any of the instruments issued that qualify as tier 2 capital; or |
| (iv) | reduce the amount of appropriated profits included in the bank’s relevant amount of qualifying capital and reserve funds, provided that the provisions of this subregulation (16) shall not apply— |
| (A) | to any reduction in the bank’s appropriated profits as a result of a transfer to another reserve fund in respect of which the relevant amount is included in the bank’s qualifying amount of capital and reserve funds; |
| (B) | to any reduction in a reserve fund that arises from the application of a Financial Reporting Standard; or |
| (C) | to any transfer by a foreign branch of a South African incorporated bank, a foreign banking subsidiary or a non-bank subsidiary of a South African incorporated bank, insofar as the aforesaid transfers do not result in a reduction in the consolidated amount of qualifying capital and reserve funds. |
| (b) | A written application by a bank under paragraph (a) for the permission of the Registrar— |
| (i) | to repurchase shares qualifying as common equity tier 1 capital, repay the proceeds received in respect of shares or instruments included in the bank’s qualifying amount of additional tier 1 capital or reduce the amount of appropriated profits shall contain written confirmation by the board of directors of the bank that— |
| (A) | the relevant capital adequacy ratios of the bank concerned shall be at least one percentage point higher than the relevant percentages determined in terms of the provisions of subregulations (8) and (9), after the said repurchase of shares qualifying as common equity tier 1 capital, repayment of additional tier 1 capital or reduction in the amount of appropriated profits, without relying on any new capital issues or future profits; |
| (B) | the remaining common equity tier 1 capital, additional tier 1 capital and appropriated profits shall be sufficient to ensure continued compliance by the relevant bank with the relevant requirements specified in subregulation (9), including, among others, that the bank’s common equity tier 1 capital adequacy ratio shall exceed the relevant specified percentage; |
| (C) | the repayment of tier 1 capital— |
| (i) | is consistent with the bank’s strategic and operating plans; |
| (ii) | takes into account any possible acquisitions, increased capital requirements of subsidiary companies or branches of the said bank and the possibility of exceptional losses; |
| (iii) | is included in the bank’s ALCO process regarding the management of liquidity risk; and |
| (D) | all shares acquired back by the bank from the repayment of capital shall be cancelled immediately; |
| (ii) | to redeem any of its tier 2 capital before the maturity thereof shall contain written confirmation by the board of directors of the bank that— |
| (A) | the bank shall simultaneously with the redemption of instruments issue further capital that shall be of a quantity and quality similar to or higher than the instruments to be redeemed when the period that lapsed since the issue date of the instruments to be redeemed is or will be less than or equal to five years; |
[Regulation 38(16)(b)(ii)(A) substituted by section 9(z) of Notice No. 943, GG46159, dated 31 March 2022 : effective 1 April 2022]
| (B) | the capital adequacy ratio of the bank concerned shall be at least one percentage point higher than the relevant percentage determined in terms of subregulations (8) and (9), after the repayment of the said tier 2 capital, without relying on any new capital issues; |
| (C) | the redemption of tier 2 capital is included in the bank’s ALCO process regarding the management of liquidity risk; |
| (c) | The provisions of this subregulation (16), to the extent that they are relevant, shall mutatis mutandis apply to a controlling company. |
[Regulation 38(18) renumbered as regulation 38(16) by regulation 22(kk)(vi) and substituted by regulation 22(aaa), of Notice No. 297, GG 40002, dated 20 May 2016]
