A comparative appraisal of south Africa's Twin Peaks-model

Abstract

The 2008 Global Financial Crisis proved to be a landmark event in the context of financial regulation to the extent that it gave rise to questions of which approach would best suit financial regulation in the pursuit of financial stability. As such the question followed whether there should be a single mega regulator covering all the basis of financial regulation and supervision or whether the mandate should be covered by different institutions of which the central bank should be part thereof. It was within this context that the Twin Peak model attracted the attention of the South African national treasury as a regulatory approach to follow which would serve South Africa better on the whole. This dissertation investigates this model as the way forward having enacted the Financial Sector Regulation Act to give effect to it. The purpose of this dissertation is to consider the specific Twin Peaks model adopted as the new approach to financial regulation in South Africa. The main components of this model will be interrogated in order to determine whether this model is an appropriate regulatory model that caters for the main aspects of financial regulation. This includes the promotion and maintenance of financial stability, safety and soundness of financial institutions and appropriate business conduct regulation. It will be shown that that through this model South Africa has augmented its approach to financial regulation to the South African Reserve Bank as the central bank through an advanced and pronounced financial stability mandate via the legislative framework of the Financial Sector Regulation Act that will enable the efficient execution of this mandate. The dissertation will also delve into a comparative investigation which will focus on the Twin Peaks model which was first pioneered in Australia in 1998 to comparatively benchmark the South African model. The lessons learnt from the failure of the model to work efficiently in Australia will also be discussed. The dissertation is concluded with recommendations for the effective implementation of Twin Peaks in South Africa.