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From the mid 1960’s until the 1980’s, the banking sector was heavily regulated, whereas the 1980s may be described as a phase of deregulation. During the mid 1960’s South African banks have been controlled through the use of credit ceilings which were utilised from 1965 to 1972 and 1976 to 1980 while high cash reserves and liquid asset requirements restricted the banks activities. Borrowers made use of direct lending bypassing the banking system (dis-intermediation) Increased interest rates in the early 1970’s resulted in savers moving away from banks into more inflation proof saving instruments. This impacted on the growth of many banks balance sheets and many companies started issuing corporate securities directly to investors to enable them to raise funds easily. Traditional saving instruments like fixed deposits started to suffer due to high inflation and personal income tax, which resulted in many diverting their savings into insurance companies and unit trusts as a hedge against inflation. As a result, banks have started to diversify into the securities market in order to reduce their reliance on interest income. Banks now offer a number of financial services and products such as: Deposit facilities, payment services such as cheque, debit and credit card facilities. The following forces of change as identified by Koch are present in the banking environment:
• Increased Competition
• Competition for deposits
• Competition for bank services
• Competition for other payment services
• Competition for loans
• Deregulation and re-regulation
• Finan ...