The 2008 Global Financial Crisis was one of the greatest schools ever attended by the world’s most intellect financial sector supervisors and regulators. These intelligent minds had for over decades placed much emphasis on only one of their central banks’ traditional roles, price stability whilst neglecting an equally important duty of directly promoting and maintaining financial stability. As pioneered during the Victorian era (1840s to 1914), the idea was that financial stability would be achieved through the implementation of monetary policy. The aftermath of the financial crisis saw the great minds from major participants on the global financial market coming together to design a regulatory framework model that facilitates the achievement financial stability. Hence, through the G20 countries’ meeting held in 2010 in Basel, Switzerland, a regulatory document or soft law rather, called Basel III was created. Incorporated in this document is a revamped macroprudential policy, a regulatory framework that is going to be heavily relied on to achieve financial stability both at a domestic and international scale. South Africa as a major participant on the global financial market and as a member of the G20 also took it upon itself to adopt the upgraded macroprudential policy as prescribed by Basel III.
However, the adoption of this refurbished policy has not been a smooth flow. Many debates and scholars’ eyebrows have been raised concerning macroprudential policy. One of the heated and interesting debates has been on the manner in which this policy is going to interact with other public and macroeconomic policies such as monetary policy given the overlaps and areas of conflict between these policies. This research aims at suggesting the best possible legal framework that will facilitate the peaceful co-existence of macroprudential policy and monetary policy. To achieve this goal, the reader is first given a sense of the Global Financial Crisis and the surrounding circumstances. From there, a brief explanation of monetary policy and macroprudential policy is provided as it is crucial for one to first understand what these two policies that have raised so much concern entail. Meaning, the objectives, institutional, operational and analytical framework of these two policies is discussed. Moving on, the heart of this research is dissected, and this involves deconstructing the heated interaction debate, where it emanates from and the different arguments that have been advanced so far. Lastly, a brief outline of the most convincing argument will be provided together with recommendations on key issues concerning the interaction debate, that the South African Reserve Bank might have to consider.
This dissertation reflects the law as at 31 October 2018
Mini Dissertation (LLM)--University of Pretoria, 2019.