Banks: Proposed R1m Minimum Denomination for FLAC Instruments

Posted 07 October 2025 Written by Acts Online
Category Financial Sector

Brought to you by SA Legal Academy: The Prudential Authority has invited comments on a draft determination that sets a R1 million minimum threshold for bank-issued financial loss absorbing capacity (FLAC) instruments.

In terms of the Financial Sector Regulation Act, No. 9 of 2017, the Prudential Authority has called for input by 17 November 2025 on a draft determination making R1,000,000 (one million rands) the prescribed minimum denomination for a bank’s FLAC instrument. The proposed determination is intended to be effective from 1 January 2026.

FLAC instruments are regulatory capital tools designed to enable banks to withstand financial distress and recapitalise without relying on government bailouts. By setting a high minimum denomination, the regulator ensures these instruments are targeted at institutional and sophisticated investors capable of assessing the associated risks. Key details of the proposal include:

  • Prescribed Minimum: R1,000,000 per instrument.
  • Objective: Strengthening the resolution framework for banks by ensuring loss-absorbing capacity.
  • Comment Deadline: Stakeholders must submit input by 17 November 2025.
  • Implementation Date: The determination is envisaged to take effect on 1 January 2026.

What this means for you, your business, or your clients

  • For yourself: No direct individual obligations; impact channelled through firm-level compliance and investment advisory roles.
  • For your business: Banks and financial institutions must review their capital issuance frameworks and update internal compliance controls to ensure all new FLAC instruments meet the R1 million threshold by the 2026 deadline.
  • For your clients: Institutional and high-net-worth investors must be advised that the entry point for these specific loss-absorbing instruments will be strictly limited to a minimum of R1 million, affecting portfolio diversification and risk management strategies.

Originally published at https://legalacademy.co.za/news/read/banks-input-sought-on-proposed-minimum-flac-denomination

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