Cross-border control of South African banks: Why deals succeed, why they stall and how to get them over the line

Author: Deborah Carmichael, Executive, Banking and Finance, ENS Africa 

The collapse of the proposed Bidvest Bank-Access Bank transaction underscores a blunt truth: cross-border acquisitions of South African banks live or die on the acquirer’s ability to satisfy an exacting, multi-layered regulatory test under the Banks Act, 1990 and the Financial Sector Regulation Act, 2017 (“FSRA”). Foreign bidders not already embedded in South Africa’s prudential and conduct architecture face a higher bar. Timing, sequencing and substance across shareholding permissions, “significant owner” approvals, controlling company registration and restructuring consents can derail even well-conceived transactions if not executed with regulatory precision.

Before South Africa adopted its Twin Peaks model, the Barclays-Absa transaction was the most salient example of a foreign bank taking control of a major South African banking group.  Since the FSRA embedded Twin Peaks, the path to control has become broader in scope, deeper in evidentiary burden and more tightly sequenced. Today, the Prudential Authority (“PA”) leads on Banks Act permissions within an integrated framework that also involves the Financial Sector Conduct Authority (”FSCA”), overlays a significant-owner regime and ties major internal reorganisations to ministerial consent. Success turns on whether the bidder designs, paces and substantiates the deal around these realities from day one.

South Africa’s Twin Peaks architecture and bank M&A

South Africa’s statutory framework for changes of control centres on the Banks Act and the FSRA.

• Banks Act gates: The Act imposes distinct approvals to cross shareholding thresholds, exercise control over a bank and restructure the group thereafter. Prior permission is required to move through shareholding bands: the PA decides up to 49%, while the Minister of Finance, on the Authority’s recommendation, decides moves above 49% per cent and 74%. The Act also limits who may exercise control, requiring either that the controller be a bank or approved foreign bank, or that a South African public company is registered as the controlling company. Any amalgamation, merger or transfer of a substantial proportion of assets and liabilities requires ministerial consent against a public-interest test. Even due diligence is regimented: it may proceed only after written notification to the Authority, with a copy of the report provided subject to strict confidentiality.
• FSRA overlays: The FSRA re-maps this terrain in three consequential ways. First, it designates the PA as the responsible authority for the Banks Act and the FSCA as the conduct regulator. Second, it overlays the Banks Act’s shareholding thresholds with the broader concept of a “significant owner”-catching any arrangement that gives person the ability to materially control or influence a financial institution’s business or strategy. Prior written approval is required to become a significant owner, and the Authority may not grant it unless satisfied the change will not prejudicially affect prudent management or financial soundness and that fit-and-proper standards are met. Third, the FSRA formally brings a conduct lens to prudential decisions through consultation and concurrence disciplines between the two regulators, while introducing a comprehensive resolution and deposit-insurance regime that sharpens expectations around governance, recovery and resolvability.

In practice, control of a South African bank no longer turns solely on capital strength and prudential fitness. It is a composite assessment of safe and sound operation, effective home-host supervision, beneficial-ownership transparency and credible conduct outcomes – exercised sequentially across interlocking approvals.

The pre-Twin Peaks benchmark: Barclays-Absa

Barclays PLC’s mid-2000s acquisition of a controlling interest in Absa Group is the most prominent instance of a foreign bank obtaining control of a major South African banking group under the pre-Twin Peaks regime. The mechanics were anchored in the Banks Act: Barclays sought permission to cross shareholding thresholds up to and beyond 49%, satisfying the then Registrar of Banks and the Minister of Finance that the acquisition was not contrary to the public interest or the interests of the bank or its depositors. Market-conduct considerations were present through the Financial Services Board (predecessor of the FSCA) but did not operate through an integrated statutory concurrence framework.

Two features of that era helped. The approval stream was more linear and concentrated in a single prudential locus, (with ministerial decisions engaged only at upper shareholding bands and for section 54 reorganisations.) and the public-interest and prudential tests were discharged without an explicit significant-owner regime or for formal conducts. As a junior member of the deal team, I remember well that none of this made the deal simple, but it made it more predictable than an equivalent application would be today.

Barclays’ subsequent staged exit – continuing into the Twin Peaks era – underlines, in reverse, the complexity that now accompanies changes of control;  disposals by a significant owner of a systemically important bank now require prior written approval and sequencing remain critical.

Why cross-border bidders face a higher bar

A foreign bidder without an established South African bank faces a steeper evidentiary climb.

The PA must rely on robust home-host supervisory co-operation, including Basel-consistent standards, information sharing and willingness to engage on on-site inspections.

It will test whether the acquiring group’s governance and risk framework can work under South African conditions, with three defensible lines of defence, independent control functions of sufficient seniority and unambiguous board accountability.

It will interrogate beneficial-ownership structures to ultimate natural persons and require a recovery and resolution stance aligned with the post-2021 architecture.

An acquirer without a fully-fledged local bank cannot assume group-level capabilities will be credited without adaptation. The PA will interrogate board composition and executive depth, require credible three lines of defence plans, test AML/CFT controls against local risks and assess how intra-group dependencies will be governed and ring-fenced.

The FSCA’s lens complicates this constructively. Where the Banks Act requires permissions to pass shareholding thresholds and register a controlling company, the regulators will expect a conduct story alongside the prudential case: clarity about customer treatment, product-governance and distribution oversight, complaint-handling and the systems and culture necessary for fair outcomes.

If the deal contemplates mergers or transfers within the banking group, ministerial consent under section 54 adds a public-interest test engaging depositor protection, systemic stability and governance in the South African operating environment. Sequencing matters: the Takeover Regulation Panel will not clear an affected transaction unless the relevant Banks Act shareholding permissions have been obtained. The due-diligence notification rule compresses the information-gathering window and changes the cadence of submissions.

The compounding effect is that long-stop dates realistic in industrial M&A are often fragile in bank-control transactions. Missing one step pushes out all dependent steps. This does not imply hostility to foreign capital – it reflects a statutory design that privileges depositor protection, systemic stability and effective supervision over speed.

Implications for the Bidvest-Access Transaction and similar deals

The public record states only that certain conditions were not fulfilled by the agreed long-stop date. Within South Africa’s framework, the friction points that derail cross-border acquisitions are well understood:

• Shareholding permissions above 49% and 74% require ministerial engagement.
• Registration as a controlling company entails full governance, executive and financial soundness review;
• Significant owner approval invites a holistic assessment of prejudicial effects on prudent management
• Section 54 consent adds a critical path dependency for asset or business transfers.

A bidder without an established local bank will need to give the PA and FSCA comfort on local governance, management capacity, customer treatment, AML/CFT controls and resolvability. The PA’s co-operation with the bidder’s home consolidating supervisor must be operationally solid. Gaps in supervisory equivalence or information-sharing will invite conditions or prolong decision-making. Competition and exchange-control clearances, while not sectoral approvals, sit in the same timetable.

Bidvest still wants to sell – Who will bid?

The strategic imperative is to design the deal around supervision from day one, with a structure the PA can supervise effectively on a consolidated basis.

• Choose the right control route: Where the acquirer is a foreign bank, the choice between acquiring directly as an approved controller or interposing a South African public company as the controlling company should reflect a candid assessment of home-host expectations and the local governance slate the bidder can credibly field on day one.
• Tell a South African story: The submission must carry a local narrative across prudential and conduct objectives. Capital strength is only a starting point: boards, committees and control functions must be real, senior and resourced; AML/CFT frameworks must be tuned to South African typologies; customer-fairness and product-governance approaches must be spelled out beyond slogans; and recovery and resolution posture must reflect the new statutory regime. Sequence regulatory engagement. Sustained, structured engagement with both peaks is indispensable and must be properly sequenced. The due-diligence notification rule requires early thought about information governance. Timetables must absorb ministerial involvement at upper shareholding bands and the practicalities of concurrence between regulators. If internal group streamlining is anticipated, the section 54 path should be acknowledged upfront, with timing implications built into the critical path. The takeover regime cannot run ahead of bank-law permissions
• Plan for conditions: Boards should assume conditions will be imposed and allocate risk accordingly. Conditions requiring substantive change – augmenting local independent directors, enhancing AML/CFT capabilities, or imposing ring-fencing. Take Time. The deal that budgets for them, in calendar and cash, is the deal that closes.

This article was first published by ENS (www.ENSafrica.com) on 17 February 2026.

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