Systemically important financial institutions

Abstract

The Global Financial Crisis of 2008/2009 has changed the global perspective of regulating financial institutions and further highlighted the need to pursue financial stability. The monitoring and counteracting of systemic risk was identified as the key to achieving a stable financial system. Although South Africa weathered the Global Financial Crises well in comparison to other jurisdictions like the USA it has, as a G20 member, adopted the movement toward achieving financial stability through the implementation of a Twin Peaks model of functional financial regulation by objective via the Financial Sector Regulation Act 9 of 2017(FSRA). According to this model, the central bank as guardian of financial stability is given the power to designate certain financial institutions as systemically important financial institutions (SIFIs) given their ability to trigger systemic collapse. This research accordingly considers the designation of SIFIs as provided for in the FSRA. Furthermore, a comparative study of Hong Kong’s financial regulatory system and designation of SIFIs is considered and analysed. It is concluded and recommended that Hong Kong’s proactive approach should be considered and potentially adopted with the aim of effectively regulating SIFIs instead of over-regulating them when giving effect to the FSRA.