The regulation of commercial paper issuance in South Africa has, since 1994, been governed by an exemption notice (the Commercial Paper Regulations) that permits certain entities to issue debt instruments without being deemed to conduct "the business of a bank" under the Banks Act 94 of 1990 (Banks Act). After more than three decades in operation, the Prudential Authority has recognised the need to modernise this regulatory framework to reflect current market practices and financial stability considerations.

On 23 January 2026, the Prudential Authority published the final draft amendments to the Commercial Paper Regulations for consultation. Following the consultation process, the Prudential Authority will seek Ministerial approval before publishing the final notice in the Government Gazette, at which point the current Commercial Paper Regulations will be repealed. The draft Commercial Paper Regulations are proposed to take effect from June 2026.

Some key changes for consideration 

The current draft Commercial Paper Regulations represents the culmination of a seven-year regulatory process that commenced in 2018 and has progressed through three iterations. For an analysis of the key issues raised in the 2023 and 2024 drafts of the Commercial Paper Regulations, see our earlier publication 'Looking Back to Look Ahead: Revisiting the 2023 and 2024 Draft Commercial Paper Regulations' published on 22 January 2026.

The Prudential Authority has responded constructively to market feedback, particularly in relation to minimum denomination scope, use-of-proceeds flexibility, auditor engagement requirements, regulatory approval requirements, regulatory capital and flac instrument carve-outs, SPI approval, and mandatory credit ratings. These improvements demonstrate meaningful engagement with industry concerns and should make the final notice more workable for market participants whilst advancing the Prudential Authority's financial stability objectives.

The latest draft introduces the following key amendments and raises certain issues that require further clarification.

Minimum denomination

Following feedback during the August 2025 informal consultation, the Prudential Authority decided to define "minimum denomination" as the minimum aggregate nominal value when originally issued to the general public by the issuer. The draft Commercial Paper Regulations now define "minimum denomination" as the minimum aggregate nominal value of commercial paper or debt securities when originally issued to the general public and expressly provides that this should not be construed to apply to any subsequent purchase, sale or transfer of such commercial paper or debt securities.

The revised definition indicates that the primary policy focus is on establishing the minimum issuance amount for commercial paper and debt securities, rather than regulating activities within the secondary market. The ZAR 12,5 million minimum denomination threshold remains in place for both commercial paper and debt securities, while the restriction now applies only to primary issuance and does not affect secondary-market trading. While confining the threshold to initial issuance represents a narrowing of regulatory scope, the ZAR 12.5-million figure itself remains substantially high. Market participants are likely to find this figure severely limiting in practice, notwithstanding the relaxation of restrictions on secondary market transactions.

Use of proceeds for "debt securities"

Proceeds from "debt securities" must be raised or obtained for general corporate purposes and any other purpose defined in the listing requirements of a licensed exchange.

In response to industry concerns regarding the restrictive nature of earlier formulations, the Prudential Authority removed the previous limitation to "capital funding" and instead adopted a broader framework encompassing "general corporate purposes" and "any other purpose" defined in exchange listing requirements. The prescriptive use-of-proceeds categories from earlier drafts have been replaced with a more flexible framework, which recognises the fungibility of money and gives issuers greater discretion while maintaining appropriate disclosure.

A significant consequence of this change is that previous references to single-asset repackaged note programmes have been removed from the draft Commercial Paper Regulations. This could effectively mean that there is no longer any express restriction on single asset versus pooled, repackaged and securitised issuances, provided the proceeds are applied for general corporate purposes or other purposes permitted under exchange listing requirements. This provides welcome flexibility for structured finance transactions which can ostensibly be undertaken under the auspices of the Commercial Paper Regulations.

Auditor engagement

The issuer must appoint an auditor to perform a non-assurance engagement to verify compliance with disclosure requirements through agreed-upon procedures (AUPs). The auditor is required to report on the procedures performed and related findings in an AUP report, in accordance with the applicable auditing standard. The draft Commercial Paper Regulations now expressly contemplates a non-assurance/AUP framework, creating a more workable structure aligned with professional auditing standards. The specific contents of the AUP will be deliberated with the audit industry.

A footnote appearing in paragraph 6 of the draft Commercial Paper Regulations clarifies that the disclosure requirements set out in paragraphs 6 and 7 apply to unlisted issuances of commercial paper and debt securities. By extension, the auditor engagement requirement set out in paragraph 6 (Disclosure in placing document) should therefore only apply to unlisted issuances. This limitation will be welcomed by issuers of listed instruments, who will be spared the expense and administrative burden associated with procuring auditor comfort letters.

Regulatory approval

All issuers of commercial paper or debt securities must, before initial issuance, submit placing documents (excluding pricing supplements), together with a summary page to the Prudential Authority for approval. This requirement, however, does not apply to issuers intending to list commercial paper or debt securities on a licensed exchange, nor does it apply to bilateral arrangements between an issuer and institutional investors. As such, pre-approval is required only for initial unlisted issuances (subsequent drawdowns/issuances off the same programme will not require approval), and bilateral institutional arrangements are carved out.

The draft Commercial Paper Regulations do not prescribe timelines within which the Prudential Authority must respond to approval requests. For market certainty, it would be useful for clear turnaround times to be specified, enabling issuers to plan their funding activities with greater predictability.

Additionally, the meaning and scope of "bilateral arrangements between an issuer and institutional investors" requires clarification to ensure consistent market application.

Regulatory capital and Flac instruments

The draft Commercial Paper Regulations create express carve-outs for banking groups issuing regulatory capital and Flac instruments:

• commercial paper issued for regulatory capital purposes must comply with section 79 of the Banks Act and Directive 5 of 2024 (reference to Directive 6 of 2017, is erroneous) and only paragraphs 1 to 3 of the draft Commercial Paper Regulations (not paragraphs 4 to 10); similarly
• debt securities that qualify as Flac instruments must comply with Prudential Standard RA03 (issued under section 30(1A) of the Financial Sector Regulation Act, 2017) and only paragraphs 1 to 3 of the draft Commercial Paper Regulations (not paragraphs 4 to 10).

Effectively, banking groups issuing Additional Tier 1, Tier 2 and Flac-qualifying instruments need to only comply with the foundational provisions (paragraphs 1 to 3) of the draft Commercial Paper Regulations and are expressly carved out from the substantive operational requirements in paragraphs 4 to 10, removing unnecessary costs and compliance burdens.

However, given that regulatory capital instruments are unlikely ever to be issued as commercial paper in practice, the carve-out relating to regulatory capital should instead reference debt securities. This would ensure that both regulatory capital and Flac instruments are permitted to be issued as debt securities within the bounds of paragraphs 1 to 3 of the draft Commercial Paper Regulations, aligning the regulatory framework with market realities.

Special purpose institutions (SPIs)

The treatment of special purpose vehicles, now referred to as "special purpose institutions" or SPIs, has been refined. SPIs must obtain prior written approval from the Prudential Authority for initial issuance, while subsequent issuances under the same programme do not require approval. The requirement to obtain the prior approval from the Prudential Authority does not apply to SPIs that intend to list commercial paper or debt securities on a licensed exchange, nor does it apply to bilateral arrangements between an SPI and institutional investors.

While the carve-out for listed issuances provides welcome clarity, the meaning and scope of "bilateral arrangements between an SPI and institutional investors" requires further clarification. It remains unclear whether this refers to single-investor private placements or one-on-one negotiations with individual institutional investors within a broader syndicated issuance. Greater certainty on this point would assist SPIs in determining when prior Prudential Authority approval is required.

Removal of mandatory credit ratings

The mandatory credit rating requirement for debt securities issuances, present in earlier drafts, has been removed from the draft Commercial Paper Regulations. Market participants are likely to welcome this change given the significant cost implications of obtaining credit ratings, particularly for smaller issuers.

Disclosure requirements 

Issuance of commercial paper or debt securities intended to be listed on a licensed exchange must comply with that exchange's listing requirements. Where there is a conflict between the disclosure requirements in the draft Commercial Paper Regulations and those of a licensed exchange, the issuer must comply with the disclosure requirements of the licensed exchange.

Compliance burden on international transactions

A significant outstanding issue concerns the uncertainty surrounding whether offshore capital-raising exercises – specifically Regulation S and Rule 144A offerings under the United States' securities laws, trigger compliance obligations under the Commercial Paper Regulations. Although these transactions are primarily aimed at international investors, the instruments may also be offered to South African institutional investors depending on structuring and transaction specific considerations. This raises broader questions about the potential extraterritorial application of the Commercial Paper Regulations and whether South African regulatory requirements extend to instruments issued abroad with only incidental South African investor participation. Market participants argue that clear guidance on the territorial scope of the Commercial Paper Regulations would resolve this ambiguity and provide certainty for cross-border transactions.

Transitional arrangements for existing Issuers

The draft Commercial Paper Regulations do not clearly address the status of commercial paper and debt securities issued under the existing Commercial Paper Regulations (Notice 1256 of 2009). Market participants require clarity on whether outstanding instruments and existing programmes will be grandfathered, or whether placing documents and programme documentation will require amendments to achieve compliance with the new framework. There is also uncertainty regarding the continued applicability of exemptions for issuers who currently benefit from relief under the existing Commercial Paper Regulations, such as local and international development finance institutions. Clear transitional provisions would provide issuers with sufficient time to adapt their programmes to the new requirements.

Other key features

• Debt securities may only be issued with a maturity ranging from a minimum of 366 days to a maximum of 30 years from the date of issue.
• Both commercial paper and debt securities must be dematerialised and settled through a licensed central securities depository or listed on a licensed financial exchange.
• All issuers must submit quarterly returns to the Prudential Authority within 15 business days after the end of each quarter (draft layout in Annexure A).
• Proceeds from commercial paper must be raised solely for operating capital and may not be applied, directly or indirectly, for granting loans or credit to the public or institutional investors, other than trade credit for the sale of goods or services.

Next steps

The Prudential Authority's consultation pack includes: (i) the draft amendments to the CP Exemption Notice (Annexure A), (ii) a comment template (Annexure B), (iii) a consolidated comments matrix (Annexure C), and (iv) a draft statement of need, impact and intended operation (Annexure D). The Prudential Authority has requested that interested parties focus their submissions on amendments made after August 2025 and avoid repeating comments already addressed in the consolidated comment matrix (Annexure C).

Comments must be submitted by 6 March 2026 using the template provided (Annexure B) to PA-Standards@resbank.co.za, for the attention of Mr Bob Chibi. The Prudential Authority will consider only comments on amendments made after August 2025.

Written by Dawid de Villiers & Lenee Green, Partners, Financial Services Regulation, Lerato Nkanza, Partner, Banking and Finance – Debt Capital Markets & Mariam Ismail, Associate at Webber Wentzel