Full steam ahead for Treasury’s ‘twin peaks’ model
The period for comment on National Treasury’s ‘twin peaks’ model of financial regulation has expired and the proposals set out in the department’s policy document released in February are being implemented. This was the message to delegates at the 12th Annual Conference of the Compliance Institute of South Africa from Ingrid Goodspeed, Treasury’s Chief Director of Financial Inclusion and Market Conduct.
The model, which was announced in Treasury’s policy document: A Safer Financial Sector to Serve South Africa Better, gives equal weight to both prudential and market conduct regulation with the SA Reserve Bank acting as the prudential supervisor and the Financial Services Board regulating market conduct.
Goodspeed said that the because of its potential for negative consequences to consumers, the financial services industry should be held to a higher standard of market conduct than other industries.
She said that Treasury had carefully considered other models of financial regulation before settling on the twin peaks model. These included the ‘institutional’ approach, used in China, Mexico and Hong Kong, the ‘functional’ approach, used by France, Italy and Spain, and Germany’s ‘single regulator’ approach.
“The twin peaks approach, which is also used by Australia, Canada and the Netherlands, garners the benefits of the single regulator approach, such as regulatory consistency, jurisdictional clarity and informational efficiency, yet also addresses the inherent conflicts between prudential regulation and consumer protection,” she said.
A joint task team comprising National Treasury, the SA Reserve Bank and the FSB was implementing the model, she said. A steering committee would promote, coordinate and drive implementation initiatives and formulate and implement financial stability measures to “limit the cost of system-wide distress in the financial system.”
Five working groups have been established. Group one is responsible for prudential regulation supervision and resolution policy; group two covers market conduct regulation; group three is looking at the economics of regulation including the cost of compliance; group four is responsible for the legislative framework and group five will look at the different institutional and infrastructural issues imperatives resulting from the integration of prudential regulation under SARB and the establishment of a market conduct regulator under the FSB, including human resources management, organisational structures, IT systems and budgets and management of the transitional period.
In terms of market conduct, a number of initiatives are under consideration. These include developing principles on how banks should set their fees, how these fees should be disclosed and what constitutes fair and unfair practice. How to protect consumers using funeral insurance and burial societies against unscrupulous operations was another area of consideration, and improving consumer financial education is also being looked at.
