ABSTRACT The purpose of this study is to analyse the cost and profit efficiency of banks in South Africa. The cost-to-income ratio has always been used in the South African banking sector in measuring efficiency. However this approach is very simplistic and does not provide enough insight on real profit efficiency. This research uses a stochastic frontier model to determine both cost and profit efficiency of four large and four small, South African-based banks. The results of the study show that South African banks have significantly improved their cost efficiencies between 2000 and 2005. However efficiency gains on profitability, over the same time period, have not been significant. No bank was found to be superior to another in terms of achieving efficiency gains in cost reduction and profitability. A weak positive correlation was found to exist between the cost and profit efficiencies, with the most cost efficient banks also being most profit efficient. With regard to bank size, cost efficiency declined with increasing bank size.

M.Com. (Financial Management) / It has been argued that inadequate credit risk management practices and high levels of credit risk was the cause of the 2007 to 2009 global financial crisis, as well as the banking crises over the two past decades, including the 1997 East Asian crisis. As a result, banks have increasingly prioritised credit risk management to ensure acceptable levels of profitability and to keep them from collapsing. However, research on the relationship between credit risk management and profitability in banks in South Africa remains limited. Therefore, this study addressed the question of whether credit risk management has an effect on profitability in South Africa’s four major banks. A quantitative approach was used to establish the relationship between profitability, represented by return on equity (ROE), and credit risk management, represented by two variables, namely capital adequacy ratio (CAR) and the non-performing loans ratio (NPLR). Secondary data for the years 2002 to 2013 was analysed using panel regression and the study concludes that not only does credit risk management have an effect on profitability in South African banks, but that bank size, operating expenses and economic growth also affect the profitability of South African banks. These findings would enable the enhancement of profitability in South Africa through constantly improving credit risk management practices and policies, and by addressing other factors that can negatively affect profitability.

Cette thèse étudie les systèmes bancaires africains et se concentre tout particulièrement sur la question de l’actionnariat bancaire et de ses impacts. Le premier chapitre étudie l’efficience de coût. Les banques étrangères sont plus efficientes que les banques domestiques et les banques panafricaines sont les banques les plus efficientes du continent. Le second chapitre étudie la cyclicité des portefeuilles de prêt. La croissance des prêts des banques africaines est sensible à l’évolution de la croissance du PIB par habitant. Les banques panafricaines ont une croissance des prêts moins cyclique. La croissance des prêts des banques étrangères est sensible à l’évolution de la croissance dans leur pays d’origine. Les chapitres trois et quatre étudient l’inclusion financière. La probabilité d’être inclus financièrement augmente lorsque l’individu est de sexe masculin, a un revenu plus élevé, une éducation plus importante, et est plus âgé jusqu’à un certain seuil. La présence des banques panafricaines augmente l’accès au crédit des entreprises. Les banques panafricaines augmenteraient aussi l’inclusion financière des ménages, mais ce résultat est moins robuste. La conclusion générale de cette thèse souligne le rôle nouveau et bénéfique que jouent les banques panafricaines sur le continent. Ces jeunes institutions financières augmentent l’efficience de coût, diminuent la cyclicité des portefeuilles de prêt, et améliorent l’inclusion financière. / This dissertation studies African financial systems with a focus on bank ownership. Chapter one studies cost efficiency. Foreign banks are more efficient than domestic banks, and Pan-African banks are the most efficient banks on the continent. Chapter two analyses lending procyclicality. Lending growth of African banks is sensitive to the GDP per capita growth. Pan-African banks have a less pro-cyclical lending behaviour. Lending growth of African foreign banks is sensitive to GDP per capita growth in their home country. Chapter three and four study financial inclusion. Being male, wealthier, more educated and older to a certain extent increases the likelihood to be financially included. Pan-African banks presence increases firms’ access to credit. Pan-African banks would also increase households’ financial inclusion, but such result is less robust.The general conclusion of this dissertation underlines the new, beneficial role Pan-African banks play on the continent. These young financial institutions increase cost efficiency, reduce cyclicality of lending and improve financial inclusion.

Thesis (M. Com. (Accountancy)) -- University of Limpopo, 2017 / This research evaluated the role of external pressure on the sustainability of South African banks. Although much research on corporate sustainability disclosure has been done, this research is important since little of the previous research in South African has given a closer examination to sustainability external pressure implication of external pressure on banking sector sustainability disclosure. In addition, this research separated banks’ sustainability disclosure into social and environmental aspects to know which aspect in the banks are more influenced by external pressure. Therefore, the main objective of this research was to examine the relationship between external pressures on social disclosure and to examine the role of external pressure on environmental disclosure in select South African banks. Although the entire commercial banks in South African made up the population of study, the sample was reduced by the availability of external pressure variables (government pressure, political pressure, social pressure, regulatory pressure, customer pressure, and two control variables – reputation and profit objectives) in the sustainability reports within the six years of study (2010 – 2015). Research data were collected from secondary data which were available from the annual integrated reports of banks. Data were analysed by means of the panel data multiple regression analysis. The analysis of data on research question 1 showed that three independent variables (Government pressure, profit objective and customer pressure) showed a significant positive relationship with social disclosure. Government pressure showed a significant relationship at a value of P=0.006 which is less than the 0.05 alpha level set for this research. This therefore means that within the sample of banks where data were collected, government pressure have a significant positive relationship with social disclosure in these banks. Also, the analysis showed that profit objective and customer pressure are positively and significantly related to social disclosure at a value of P=0.05 which is equal to the alpha of this research. This also means that within the sample of banks where data vi were collected, profit objective and customer pressure have a significant positive relationship with social disclosure in these banks. On the contrary, four out of the seven independent variables (regulatory pressure, political pressure, social pressure and reputation) showed no significant relationship. The second research question in this study was to find whether a relationship exists between external pressure and environmental disclosure. However, all the independent variables showed a non-significant relationship with environmental disclosure. In conclusion, the research made some recommendations which include that future researchers should expand the number of banks by including other financial institutions, the comparison of sustainability disclosure in banks before and after the King III report, more improved teaching and research on banking sector sustainability disclosure in higher institutions, communication of research result such as on banking industry sustainability to practitioners and to government agencies. Other recommendations include the need to conduct a regional study to include other African countries on banking sector sustainability and to conduct a survey study on external pressure on banking sector environmental activity and disclosure

In the environmental context banks face direct, indirect and reputational risks from their internal operations and their external business activities. The current specific focus on the protection of the environment makes it essential for banks and their directors to be aware and stay on top of potential risks and liabilities. This is especially so because banks’ directors can be criminally prosecuted for environmental crimes. The application and effect of the Prevention of Organised Crime Act 121 of 1998 (POCA) on persons convicted of an environmental crime or crimes has been identified as a possible new or added risk for banks and their directors. Banks in addition to their normal environmental risk and liabilities also need to contend with the possibility of lender liability. Existing legislation pertinent to lender liability does not expressly or specifically deal with lender liability. Absence of judgements on lender liability further exacerbates the risks and the uncertainty for banks in South Africa. Therefore, banks remain subject to legal uncertainty and associated risks. The issue of lender liability specifically with regard to the implication of “the person in control” requires clarification. Hence, it is recommended that legislation relevant to lender liability (National Environmental Management Act 107 of 1998; National Water Act 36 of 1998 and the National Environmental Management: Waste Act 59 of 2008) be revised to specifically accommodate and protect lenders (lending banks) in certain distinct circumstances. The role of banks is that of an intermediary between borrowers and lenders of money. Therefore, it influences the direction and pace of economic development and by default steers and promotes either sustainable or non-sustainable development. Currently, mainstream banks are in effect financing a brown economy and hence subscribe to a weak form of sustainability. It would seem that mainstream banks are more concerned with managing the impact that environmental risk may have on bank lending than the impact of bank lending on the environment. The evolving nature of sustainability (from weak to strong and from a brown to green economy) demands a fundamental policy change for banks. It is expected that mainstream banks will be put under even greater pressure than before to make the transition from weak to strong sustainability. Hence, banks’ current environmental risk management systems will not be sufficient to cater for new environmental risks and liabilities that the move to stronger sustainability (in the form of the green economy) will present. Banks should adopt the stronger version of sustainability; formulate environmental principles that the bank will adhere to; incorporate these environmental principles into all aspects of its lending cycle, develop an environmental risk management system that should include as a minimum the identification of all the applicable legislation pertaining to the specific financing or lending of capital, risk identification, assessment of the specific risk, implementation of risk control measures, mitigation of the risk, risk monitoring and auditing. / LLM (Environmental Law and Governance), North-West University, Potchefstroom Campus, 2014

In the environmental context banks face direct, indirect and reputational risks from their internal operations and their external business activities. The current specific focus on the protection of the environment makes it essential for banks and their directors to be aware and stay on top of potential risks and liabilities. This is especially so because banks’ directors can be criminally prosecuted for environmental crimes. The application and effect of the Prevention of Organised Crime Act 121 of 1998 (POCA) on persons convicted of an environmental crime or crimes has been identified as a possible new or added risk for banks and their directors. Banks in addition to their normal environmental risk and liabilities also need to contend with the possibility of lender liability. Existing legislation pertinent to lender liability does not expressly or specifically deal with lender liability. Absence of judgements on lender liability further exacerbates the risks and the uncertainty for banks in South Africa. Therefore, banks remain subject to legal uncertainty and associated risks. The issue of lender liability specifically with regard to the implication of “the person in control” requires clarification. Hence, it is recommended that legislation relevant to lender liability (National Environmental Management Act 107 of 1998; National Water Act 36 of 1998 and the National Environmental Management: Waste Act 59 of 2008) be revised to specifically accommodate and protect lenders (lending banks) in certain distinct circumstances. The role of banks is that of an intermediary between borrowers and lenders of money. Therefore, it influences the direction and pace of economic development and by default steers and promotes either sustainable or non-sustainable development. Currently, mainstream banks are in effect financing a brown economy and hence subscribe to a weak form of sustainability. It would seem that mainstream banks are more concerned with managing the impact that environmental risk may have on bank lending than the impact of bank lending on the environment. The evolving nature of sustainability (from weak to strong and from a brown to green economy) demands a fundamental policy change for banks. It is expected that mainstream banks will be put under even greater pressure than before to make the transition from weak to strong sustainability. Hence, banks’ current environmental risk management systems will not be sufficient to cater for new environmental risks and liabilities that the move to stronger sustainability (in the form of the green economy) will present. Banks should adopt the stronger version of sustainability; formulate environmental principles that the bank will adhere to; incorporate these environmental principles into all aspects of its lending cycle, develop an environmental risk management system that should include as a minimum the identification of all the applicable legislation pertaining to the specific financing or lending of capital, risk identification, assessment of the specific risk, implementation of risk control measures, mitigation of the risk, risk monitoring and auditing. / LLM (Environmental Law and Governance), North-West University, Potchefstroom Campus, 2014