In Pursuit of Financial Stability - A Closer Look at Twin Peaks

Abstract

The 2008 Global Financial Crisis (“GFC”), brought the global financial system to its knees. This Crisis, however, showed the world how critically important the maintenance of financial stability is. After the Crisis the pursuit of financial stability became a core goal of financial regulation. Various countries sought to reform their approach to financial regulation in order to ensure the stability of their financial systems.

A regulatory model that emerged in the 1990s, the Twin Peaks model, conceptualized by Michael Taylor, gained favour with some countries. This model seeks to provide both systemic protection and financial consumer protection by two peak regulators responsible for systemic and prudential regulation and supervision, on the one hand, and conduct of business regulation and supervision, on the other.

Although South Africa escaped the GFC relatively unharmed, it committed itself as G20 member to the post-GFC reform agenda. This, inter alia, entailed the decision to overhaul its approach to financial regulation and switch to a Twin Peaks model. This dissertation accordingly looks at the models of financial regulation and interrogates the specific structure of the Twin Peaks model adopted by South Africa. It further looks at the Dutch Twin Peaks model that was adopted by the Netherlands before the GFC to consider whether there are lessons that can be leant from the Dutch Twin Peaks model.