Twin-peaks regulation: key changes and challenges

Twin-peaks regulation: key changes and challenges

Following a formal review of the South Africa financial regulatory system, it was proposed that South Africa move towards a “Twin Peaks” model of financial regulation. In the 2012 budget speech the Minister of Finance (Pravin Gordhan) said: “As announced last year, we intend to shift towards a twin peaks system for financial regulation, where we separate prudential from market conduct supervision of the financial sector. Consultations continued, and in August 2015, it was announced that the Financial Sector Regulation Bill would be tabled in the National Assembly. Government Gazette. No 749, includes an explanatory summary of the objectives of the bill and the manner to achieve these objectives.”   The Minister of Finance tabled the Financial Sector Regulation (FSR) Bill in Parliament on 27 October 2015, after taking into account comments received on the Bill published in December 2014. It is anticipated that the Bill will be enacted next year, to enable implementation soon thereafter.

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twin peaks regulation

The “Twin Peaks” model is seen as giving transparency, market integrity and consumer protection sufficient priority. Flowing from this the two regulators will namely be the “Prudential regulator” and the “Market conduct regulator”. The prudential regulator will form part of the South Africa Reserve Bank (SARB).

The intention of the Prudential Regulator is to enhance financial stability by promoting safety and soundness of regulated institutions. The market conduct regulator will form part of a restructured Financial Services Board (FSB), with the aim to protect consumers of financial services and promote confidence.

The move to the twin peaks model will result in certain key changes. Organisations will need to adapt to these changes and regulatory requirements.

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