Designation of systemically important financial institutions in terms of the financial sector regulation bill

Abstract

The 2008 Global Financial Crisis caused the collapse of a number of the so-called ?too-big-to-fail? financial institutions. The crisis highlighted the need to maintain and promote financial stability, by monitoring systemic risks in the financial system. One of the popular global trends in financial sector regulation in response to the crisis was a shift towards a Twin Peaks model. According to this model, the authority responsible for prudential regulation is given the power to designate certain institutions as systemically important financial institutions (SIFIs). Further, a number of international instruments have been published, setting out standards and guidelines for designation of SIFIs. South Africa is currently on the move towards the Twin Peaks model, which is facilitated by the Financial Sector Regulation Bill. This dissertation investigates the rationale behind SIFIs and the process of designating SIFIs in South Africa once the Bill is enacted as an Act. A comparative study of Australia and the U.S is undertaken and the conclusion is that South Africa should lean more towards the Australian approach of designating SIFIs.