7 February 2013
South Africa’s move to a so-called “twin peaks” model of regulation will boost the country’s resilience and further stabilize its financial system, the Financial Stability Board (FSB) says in its peer review of South Africa.
The FSB was set up following the global financial crisis of 2008-09 to coordinate the work of national financial authorities and international standard setting bodies at an international level.
Based in Basel, Switzerland and hosted by the Bank for International Settlements, it aims to develop and promote effective regulatory, supervisory and other financial sector policies in the interest of global financial stability.
In 2011, the South African National Treasury issued a policy document for financial reform that proposed the adoption of a “twin peaks” model of financial regulation.
This regulatory structure involves separate prudential and market conduct regulators, aimed at creating a more resilient and stable financial system.
“The FSB welcomes the planned reforms and agrees that a shift to a twin peaks model provides a good opportunity for South Africa to streamline responsibilities and elevate the importance of market conduct regulation,” the FSB said in its peer review on South Africa this week.
Last week, the Financial Regulatory Reform Steering Committee, comprising the National Treasury, South African Reserve Bank and Financial Services Board, published for public comment a summary of the proposals for implementing the twin peaks model.
The Treasury said the twin peaks approach entailed creating a prudential regulator housed in the South African Reserve Bank (SARB), and transforming the Financial Services Board into a dedicated market conduct regulator.
The objective of the prudential regulator will be to maintain and enhance the safety and soundness of regulated financial institutions.
The FSB suggested that South Africa consider shifting legal authority for financial disclosure and regulation of public companies from the Department of Trade and Industry to the Financial Services Board, which would remain the lead regulator of the exchanges under the twin peaks structure.
“There is scope for additional cooperation between the South African Reserve Bank and the Financial Services Board with the National Credit Regulator,” the FSB added.
South Africa was the seventh country to be voluntarily peer reviewed by the FSB. The United Kingdom, United States, Indonesia and Germany will undergo a peer review in 2013.
Source: SAnews.gov.za, with additional reporting by SAinfo