We create value by acting with integrity in everything that we do

Doing the right thing, in the right way, enhances our customer outcomes, promotes trust in the financial system, and helps ensure that we provide appropriate products and services.

Key matters raised by stakeholders …

  • Ethical work environment underpinned by sound conduct and corporate values
  • Financial system stability spanning financial soundness to fair treatment of consumers
  • Adequate and timeous response to consumer and customer-focused legislative changes
  • Adapting to and influencing changes to legislation and regulations that have a substantial impact on the business and the financial services sector

… inform our material focus areas …

  1. Driving an ethical culture
  2. Responding to conduct-related regulations
  3. Managing conduct-related risk

… to achieve the following value …

For our regulators, customers and clients

  • Fair and ethical treatment when dealing with the Group
  • A stable financial services sector
  • Inclusive and transformed sector
  • Fair advice and distribution

For the Group

  • Sound corporate values, high ethical standards, market integrity and good conduct practices
  • Sustainable operations
  • Stakeholder trust and support

1. Driving an ethical culture

The financial services industry relies on trust, and good conduct is based on our daily behaviours, exhibited in our individual and collective actions and decisions.

As a participant in local and global platforms, such as local banking associations and Group of Thirty (G30), we recognise the systemic importance of the financial services sector, and the need to aspire to the highest standards of culture and conduct.

Our code of conduct outlines the behaviours which govern our interactions with stakeholders across the business. Our Conduct culture fosters values-based decision-making and shows how our policies and practices align with our Values. Our supplier code of conduct outlines the standards we expect from them.

We have a comprehensive programme that educates and empowers all employees in terms of their rights and responsibilities. This contributes to a culture of trust. Our training and awareness programmes, underpinned by clear policies, ensure that our employees:

  • are aware of the values and behaviours expected of them – as outlined in our code of conduct – including those relating to gifts and entertainment;
  • complete fighting financial crime training, which includes anti-bribery and corruption, anti-money laundering and sanctions;
  • develop a sensitivity to situations of real or perceived conflict of interest and learn how to deal with them when they arise;
  • put Treating Customers Fairly (TCF) at the forefront of what we do; and
  • are aware of the tools available to them to raise their concerns of unethical behaviour or suspected fraud through our whistleblowing programme.
1 Fighting financial crime and Conduct Risk College introduced in 2014 and 2015 respectively.

Our performance management processes and reward decisions emphasise behaviour and commercial objectives, encouraging the right conduct, and making the consequences of misconduct clear.

2. Responding to conduct-related regulations

Laws, regulations and codes further define expectations of how we conduct our business. These cover a wide array of aspects within our business, from Know Your Customer requirements (identity document, proof of residence and proof of income), to the protection and processing of information through to how we design and sell our products and services.

In South Africa, we are supervised and regulated mainly by the South African Reserve Bank, Financial Services Board and ancillary regulators such as the Competition Commission of South Africa and the Financial Intelligence Centre. The Reserve Bank oversees the banking industry, and follows a risk-based approach to supervision, while the Financial Services Board oversees non-banking financial services such as insurance and investment businesses. The National Credit Regulator regulates consumer credit, and the National Consumer Commission is responsible for other aspects of consumer protection not regulated by the Financial Services Board. These oversight responsibilities have been revised under the Financial Sector Regulation Act.

Our operations in Rest of Africa are primarily supervised and regulated by the central banks and, in some instances, are also regulated by financial market authorities.

Regulations driving consumer protection and ethical behaviour in the financial services industry are evolving. While this places additional requirements on the Group, we support efforts to ensure a stable financial services sector and a safe and fair operating environment. We are seeing an increasing emphasis on regulations relating to responsible investing and financing initiatives. We have already adopted the Code for Responsible Investing in South Africa and continue to monitor other guidelines such as the Task Force on Climate-related Financial Disclosures.

We seek to balance the requirements and the cost of compliance to minimise the impact on customers and clients, and on shareholder returns.

The diagram alongside displays this regulatory environment, the stage of implementation and the impact on our operations.

This regulatory landscape has a wide-reaching impact on our business, and we provide a summary of the key regulatory themes currently in focus.

Combating money laundering, corruption and terrorist financing

We have a zero-tolerance approach to non-compliance, and constantly enhance our control environment to reduce the risk of our employees, customers and clients breaching legislation when dealing with the Group. We follow a structured approach to ensure that business processes, policies or system changes necessary for regulatory change are implemented.

Effective compliance with local and international banking regulations is critical for a competitive and sound banking system which enjoys good international standing. South Africa’s financial system, and its ability to interact effectively with the global financial system (particularly our banking system’s access to foreign currency to support foreign exchange clearing, lines of credit to facilitate transactions with local businesses, and global payments), is key for the country and the region’s economic growth. The enactment of the Financial Intelligence Centre Amendment Act supports this.

Protecting personal information

In various jurisdictions, we are governed by laws that control the processing and holding of personal data, as well as its security, with an increasing focus on cross-border processing and storage of data. This requires a careful balance between achieving processing efficiencies, and meeting local requirements.

We have done extensive work to prepare for the implementation of the Protection of Personal Information Act in South Africa.

Similarly there is ongoing focus to ensure the protection of our customer data in our Rest of Africa operations.

Responsible credit and insurance

Governments in a number of jurisdictions are enacting or considering legislative focus areas to regulate credit extension. Some of these seek to reduce consumer indebtedness through limits, and to ensure banks provide more information to credit bureaus. Regulatory matters relating to the limitation of fees and interest rates, maximum costs of credit life and mechanisms for resolving over-indebtedness are also being addressed. Another focus area deals with debt relief for consumers, which remains topical in South Africa, with engagement between industry and the regulator continuing. South Africa’s National Credit Amendment Act provides for the once-off removal of defined adverse consumer credit history, followed by the automatic removal of legal judgments when debts are settled.

Twin Peaks reform in South Africa

The Financial Sector Regulation Bill overlays existing financial sector legislation creating a framework designed to supervise the financial sector comprehensively and, ultimately, ensure financial stability and better outcomes for customers and clients. The two elements are prudential supervision by a Prudential Authority within the South African Reserve Bank and market conduct whereby the Financial Services Board will be transformed into a dedicated market conduct regulator – the Financial Sector Conduct Authority. We are well positioned to meet the requirements of Twin Peaks when it is enacted later in 2018.

Retail Distribution Review in South Africa

Despite the Financial Advisory and Intermediary Services Act’s significant progress in raising intermediary professionalism, improving disclosure to customers and clients as well as mitigating certain conflicts of interest, there remained concerns about poor outcomes for customers and mis-selling of financial products. The Financial Services Board’s Retail Distribution Review aims to reform the framework for financial advice and for distributing financial products to financial customers. The framework is wide ranging, covering delivery of suitable products; fair access to advice; fair and transparent pricing; product comparability across the industry; standards of professionalism and sustainable business models for financial advice that enable advisors’ businesses to deliver fair customer outcomes over the long term.

3. Managing conduct-related risk

It is essential that we monitor our performance against our own as well as regulatory conduct standards, and this performance is embedded in our three lines of defence risk management approach. Our conduct risk framework brings together all our activities.

Focusing on conduct risk helps us to:

  • provide appropriate products and services at the right prices to our customers and clients;
  • uphold market integrity;
  • reward the right activities and behaviours; and
  • mitigate potential risks.

We monitor our progress in managing conduct risk through a combination of internal processes and stakeholder feedback.

A number of matters relating to the Group for example the Public Protector’s Bankorp report, have been profiled to the public, and we respond to these through the relevant and appropriate channels. Sound response mechanisms are in place particularly in addressing the issues that potentially attract reputational damage. We revised our reputation risk framework and strengthened our media relations capabilities, allowing us to manage issues, while maintaining internal communication with our colleagues.


We continuously evaluate our conduct-monitoring process, our review activities and our compliance controls. Based on these activities, we are able to either affirm the effectiveness of these programmes and controls or, where deficiencies are identified, adopt appropriate remedial and/or mitigating steps. When and where appropriate, we make public disclosures on material findings.

In February 2017, the South African Competition Commission referred Absa Bank, among other banks, to the Competition Tribunal to be prosecuted for breaches of South African competition law related to foreign exchange trading of the South African rand. This was based on the finding that the respondents had engaged in various forms of collusive behaviour. Along with Barclays PLC, we were the first to bring the conduct to the attention of the Commission under its leniency programme and have cooperated with, and will continue to cooperate with them, in relation to this matter. The Commission is therefore not seeking an order from the Tribunal to impose any administrative fine on Absa Bank.

Arising from findings of previous reviews, remediation projects relating to our compliance to the National Credit and Financial Intelligence Centre Acts have been successfully concluded.

In the normal course of business, our various regulators conduct reviews of our business operations’ controls and our progress in meeting regulatory requirements. We continuously focus on compliance and risk controls. At times however, remedial action is required, and administrative penalties and fines are levied on the Group. In 2017, we incurred R5.3m in penalties – the most notable being the R5m penalty imposed on Barclays Bank Mozambique relating to weaknesses in transaction monitoring protocols regarding anti money laundering in 2015, which has since been remediated.

Internal factors

We remained focused on system stability to decrease service interruptions, the protection of customer and client information in an ever increasing digital environment and increasing employees’ product knowledge and skills needed to uphold Treating Customers Fairly practices. We have further improved our complaints management processes to ensure the recording of, and prompt response to, customer feedback.

Treating Customers Fairly

Our comprehensive Treating Customers Fairly outcome survey measures the experience of customers and employees on the perceived performance of the Group against our conduct risk and Treating Customers Fairly outcomes.

The survey assesses their perceptions about our:

  • corporate culture;
  • product design and marketing;
  • quality of information;
  • quality of advice; services and expectations;
  • barriers to switch to another service provider;
  • cancel; and
  • our complaints management.

The survey includes a range of questions relating to culture, customer strategy, proactive management and market integrity.

South Africa Banking’s and Rest of Africa Banking’s scores decreased from 61% to 60% and 65% to 61%, respectively. A more robust Treating Customers Fairly outcomes process was implemented in the Rest of Africa during the year, resulting in lower, but more accurate scores.

We remain focused on:

  • the impact of culture on conduct across the Group to enhance integrated decision-making in the management of conduct risk outcomes;
  • implementation of the revised Conduct Risk Framework, which was enhanced to incorporate the G30 recommendations on conduct and culture. The G30 is an international body with one aim being to strengthen good practices in banking culture and governance;
  • using data analytics and digital platforms to improve the management of conduct risk and customer service; and
  • implementing and embedding new regulatory requirements across the continent.

Monitoring the conduct of employees

Overseen by the Group Social and Ethics Committee, we monitor employee conduct through surveys and reviews of the number and root causes of disciplinary cases, grievances and whistleblowing statistics.

The number of disciplinary cases as a percentage of employees remains stable, and the majority of matters dealt with in 2017 relate to less serious offences. Of the 2 036 disciplinary cases concluded in the year (2016: 1 976), 444 were as a result of ethical breaches (2016: 462).

Our whistleblowing programme provides a safe platform to raise concerns of unethical behaviour or fraud confidentially and, where permissible, anonymously. 285 employee conduct-related whistleblowing cases were reported and concluded (2016: 251). However, only 44% (2016: 35%) were substantiated. Tip-offs are the most common detector of fraud, proving the importance of a whistleblowing function.

Once a tip off has been received it is categorised and assessed for allocation to the appropriate investigative unit. This process allows for the management of actual or potential conflicts of interest of investigative parties on a case by case basis. Where issues are identified they are referred to senior management for remediation action.

Grievances as a percentage of permanent employees decreased significantly to 0.75% (2016: 3.2%). This is mostly due to the improved timing of the performance rating communications, and the improvements which we began in 2016 to manage grievances related to annual performance management ratings and bonus payments individually. Overall, the number of grievances remains within tolerance levels.