Protecting depositors and promoting financial stability in South Africa : is there a case for the introduction of deposit insurance?
- Authors: Ngaujake, Uahatjiri
- Date: 2004
- Subjects: Banks and banking -- South Africa , Bank deposits -- South Africa , Bank failures , Banks and banking -- State supervision , Deposit insurance , Consumer protection -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1025 , http://hdl.handle.net/10962/d1002760 , Banks and banking -- South Africa , Bank deposits -- South Africa , Bank failures , Banks and banking -- State supervision , Deposit insurance , Consumer protection -- South Africa
- Description: Banks play a pivotal role in economic growth and development of all countries and therefore the stability of the banking system is a vital goal of bank supervisors. Banks act as delegated monitors of depositors’ funds and this relationship, like all principal-agent relationships, presents agency problems. In the case of banks agency problems arise because depositors cannot accurately assess the financial health of banks due to the asymmetry of information existing between banks and depositors. Because banks possess private information on their borrowers, which depositors cannot access, it exposes depositors to risk of loss of deposits in cases of bank failures originating from nonrepayment of such loans. This asymmetry of information also exposes banks to runs by depositors and these runs can lead to bank failures with devastating effects for the financial system and the economy at large. It is for this reason that banks are regulated and supervised more than other institutions. Bank failures are a worldwide phenomenon and South Africa is no exception as evidenced by historical and recent bank failures in South Africa. This thesis investigates the desirability of introducing an explicit deposit insurance scheme in South Africa as a means of protecting small, unsophisticated depositors who are almost always the losers when banks fail, and promoting financial stability. The study finds that bank failures in South Africa are mainly attributable to mismanagement of banks, liquidity problems and fraud. Bank failures as a result of the aforementioned reasons have led to depositors losing their deposits in South Africa. The absence of a clearly defined depositor protection scheme in South Africa, the inadequacy of the hitherto implicit guarantee system to protect depositors, and the poor record of the South African Reserve Bank in bank failure resolution, form the basis of the conclusion of the study, i.e., there is a case for the introduction of deposit insurance in South Africa. In order to assist South African policymakers in designing an effective deposit insurance scheme for the country, the thesis further provides a guide on how the most important design features of deposit insurance should be handled. This is in an attempt to ensure that the moral hazard problem inherent in deposit insurance is overcome.
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- Date Issued: 2004
The market efficiency hypothesis and the behaviour of stock returns on the JSE securities exchange
- Authors: Mabhunu, Mind
- Date: 2004
- Subjects: Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1027 , http://hdl.handle.net/10962/d1002762 , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa
- Description: While the Efficient Market Hypothesis (EHM) has been widely accepted as robust by many researchers in the field of capital markets, the hypothesis’ robustness has been under increased scrutiny and question lately. In the light of the concerns over the robustness of the EMH, the weak form efficiency of the JSE is tested. Stock returns used in the analysis were controlled for thin trading and it was discovered that once returns are controlled for thin trading, they are independent of each other across time. Some of the previous studies found the JSE to be inefficient in the weak form but this research found that the JSE is efficient in the weak form. A comparison is also made between the JSE and four other African stock markets and the JSE is found to be more efficient than the other markets. The developments on the JSE, which have improved information dissemination as well as the efficiency of trading, contributed to the improvement of the JSE’s efficiency. The improvement in operational efficiency and turnover from the late 1990s has also made a major contribution to the improvement in the weak form efficiency of the JSE. Theory proposes that if markets are efficient then professional investment management is of little value if any; hence the position of professional investment managers in efficient markets is investigated. Although the JSE is found to be efficient, at least in the weak form, it is argued that achieving efficiency does not necessarily make the investment manager’s role obsolete. Investment managers are needed even when the market can be proved to be efficient.
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- Date Issued: 2004