The Twin Peaks model of financial sector regulation will see the creation of a prudential regulator – the Prudential Authority – housed in the South African Reserve Bank (SARB), while the FSB will be transformed into a dedicated market conduct regulator – the Financial Sector Conduct Authority.
The implementation of the Twin Peaks model in South Africa has two fundamental objectives:
to strengthen South Africa’s approach to consumer protection and market conduct in financial services, and
to create a more resilient and stable financial system.
The Prudential Authority’s objective will be to promote and enhance the safety and soundness of regulated financial institutions; while the Financial Sector Conduct Authority will be tasked with protecting financial customers through supervising market conduct. Structures will be in place to ensure proper co-ordination between the two authorities and other regulators.
The Financial Sector Regulation Bill (FSR Bill, December 2014) is the first in a series of bills towards the implementation of the Twin Peaks model and it follows two policy papers that respond to lessons learnt from the 2008 global financial crisis: A Safer Financial Sector to Serve South Africa Better (National Treasury, February 2011) and Implementing a twin peaks model of financial regulation in South Africa (Financial Regulatory Reform Steering Committee, February 2013).
What does Twin Peaks mean for the FSB?
The FSB will have a new name and a new mandate. As the Financial Sector Conduct Authority (FSCA), its objective will be to protect financial customers by
- ensuring that financial institutions treat financial customers fairly;
- enhancing the efficiency and integrity of the financial system; and
- providing financial customers and potential financial customers with financial education programs, and otherwise promoting financial literacy and financial capability.
The FSB is in the process of reviewing its structures, frameworks and resources in preparation for the shift to its new Twin Peaks focus.