The importance of a legislative framework for cooperation and collaboration in the twin peaks model of financial regulation

Abstract

The enactment of the Financial Sector Regulation Act 9 of 2017 ('the FSR Act') on 21 August 2017 marks the first stage of South Africa's transition from a sectoral to a Twin Peaks model of financial regulation. On 1 April 2018 — the commencement date of the FSR Act — two regulators, the Prudential Authority and the Financial Sector Conduct Authority, were established. This article considers the mechanisms introduced by the FSR Act to facilitate cooperation and collaboration between the South African Reserve Bank ('SARB') and the financial sector regulators, and other organs of state as well, by comparing these measures to those available in Australia. The cooperation and collaboration in South Africa are discussed on two levels namely, first, the focused cooperation and collaboration enabling the SARB to fulfil its financial stability mandate and, secondly, the broader cooperation and collaboration for the effective operation of the Twin Peaks model. This is compared to the cooperation and collaboration in Australia between the Reserve Bank of Australia and the other two regulatory agencies, APRA and ASIC. It appears that immutable aspects of cooperation and coordination should preferably be captured in legislation, especially aspects such as conflict resolution and lines of cooperation and collaboration in crisis times.