Discovery given approval to set up its own bank
Insurer Discovery had obtained authorisation from the registrar of banks to set up its bank ahead of obtaining a full banking licence, it said on Tuesday.
"We have received approval in terms of Section 13 of the Banks Act. However, the approval for the banking licence is still pending," group chief financial officer Richard Farber said. "The next step is for us to apply for the registration of the institution as a bank.
This can take up to a year and is subject to the approval of the registrar of banks."
Discovery was unable to disclose anything further, but was working on conditions imposed by the Reserve Bank.
Reserve Bank spokesman Jabulani Sikhakhane said earlier the Bank did not comment on the specifics of applications, although he confirmed the application was in progress.
The approval is the first step in further diversifying its business from life and health insurance, where the bulk of Discovery’s profit lies. Should it clinch the full licence, it will only be the fifth retail bank in the past two decades to do so, following Bidvest, Ubank, Capitec and the resurrected African Bank, which obtained a new licence in 2015.
"Postbank and TYME were authorised earlier this year in terms of Section 13 of the Banks Act to establish banks," Sikhakhane said. It meant they had 12 months from the date of authorisation to [apply], he said.
PSG Wealth portfolio manager Adrian Cloete said Discovery was making "good progress" on the regulatory process.
"Discovery has the capital in place, they have appointed bankers, and they already have a very successful credit card offering," he said.
During the year to June, the group increased its interest in the Discovery Card joint venture with First National Bank, raising its share of the profit to 55%, from 20%. This resulted in R121m flowing to the group from the credit card business.
"Getting the infrastructure ready is going to require an enormous amount of work involving designing, building and testing a substantial system on which the banking operation will run," Cloete said.
But the group had an excellent track record of building and designing complex systems evidenced by the platforms on which it conducted its Discovery Health, Life, Vitality and offshore operations, Cloete said.
"They should complete this in the given time frame."