Financial regulation in

the South African

Juta will insert the book banking industry
cover here
Chapter 3
Prof J Coetzee
Dr J de Beer
INTRODUCTION
• Banks traditionally regarded as heavily regulated
• Support real economy through credit provisioning and
facilitation of transactions
• Aim of financial regulation to ensure financial stability.
• Global Financial Crisis (GFC) motivated global financial
regulatory reform
• Focus on managing system-wide risk
• South Africa committed to global financial regulatory reform
agenda
 FINANCIAL REGULATION
AND SUPERVISION: MEANING
Financial regulation
control by financial regulators over activities of financial
institutions. specific rules of behaviour
• many POSSIBLE forms, e.g. capital requirements, mandatory
information disclosure, minimum start-up requirements
• Main objective: ensure safety, stability of financial system
Financial supervision
More general observation of the behaviour of financial
institutions in order establish to what extent they implement
the relevant regulations
 AIM OF FINANCIAL REGULATION
AND SUPERVISION
• Ensure financial stability, prevent expensive bailouts
• Financial sector important to advance socio-economic
transformation
Four policy objectives in South Africa
• Financial stability
• Consumer protection and market conduct
• Expanding access through financial inclusion
• Combating financial crime
 Policy objectives
Financial stability
• Safe and sound banks that operate in a safe banking system.
• Absence of financial crises
• Micro- and macroprudential regulation and supervision
Consumer protection and market conduct
• Treated fairly, vulnerable consumers not being exploited
Expanding access through financial inclusion
to help manage their money, improve savings opportunities
Combating financial crime
• Combat money laundering and terrorism financing
 AIM AND RATIONALE OF FINANCIAL
REGULATION
Objectives:
Outcome of what regulation is trying to achieve
Rationale:
• Why regulation is necessary if the objectives were to be
achieved
• Ultimate rationale to correct for market imperfections
• Asymmetric information
• Adverse selection
• Regulation attempts to reduce these problems
Rationale for Regulation
• Consumer confidence and trust
• Interconnected nature of the system may lead to a bank run
• Moral hazard -banks incentivised to take on excessive risks
• Regulators can identify early warning signs and be proactive
• Globalisation has forced banks to be dynamic
• Redistributional considerations
• Problems related to financial education, literacy of the poor in
SA
Limitations of regulation and trade-offs

• Several trade-offs. E.g. between financial stability and

access to credit and consumer protection
• Needs to balance benefits of higher degree of
achievement of objectives (effectiveness) with costs
that may go with this (efficiency)
Regulator need to ensure balance between regulatory
objectives
 Current financial regulatory, supervisory
framework in SA
• Which regulator oversees which type of financial institution/ which
aspect of financial institution regulated by which regulator
• Currently, type of business conducted determines the regulator:
– Bank Supervision Department (BSD) within SARB prudentially regulates
and supervises banks
– Financial Services Board [FSB(SA)] prudentially regulates and supervises
most non-bank financial institutions
– National Credit Regulator (NCR) regulates market conduct of all credit
providers
• Thus, SA banks subject to a number of regulators
 Prudential regulation
Aim: ensure banks financially sound, can meet obligations
• BSD (SARB) responsible authority
Prudential activities:
• Issuing banking licenses
• Monitoring bank activities in terms of prudential requirements
• Imposition of penalties in cases of noncompliance
• Crisis management and resolution in the case of bank failure
• Framework based on internationally recognised key supervisory
methodologies and principles
– Reviewed by Standing Committee for revision of Banks Act
Legal framework for prudential regulation and
supervision in SA
• Tier one: Banks Act (94 of 1990), Co-operative Banks
Act (40 of 2007), Mutual Banks Act (124 of 1993);
• Tier two : Regulations applicable to the acts in tier
one;
• Tier three : directives, circulars and guidance notes
related to acts in tier one
• Also King Code on Corporate Governance and Basel
Capital Accord
 Requirements for registration as bank in
SA
• SA deposit-taking institutions must have banking
licence
• Registrar of Banks will only grant a licence when
conditions specified in section 13 of Banks Act are
fulfilled:
– Meet requirements of Banks Act on continuous basis
– Shareholding structures, capital sources before registration
– Suitability of directors and senior management
– Info about business systems, business plans, financial
projections
Prudential Requirements
• Minimum capital requirements Section 70 of Banks Act
– Minimum start-up capital R250million.
– Ongoing minimum capital: highest of R250 million or % of risk
weighted assets
• Minimum liquid asset requirements Section 72
• Concentration risk requirements section 73
– Needs Board of Directors approval to grant loans, make
investments to any person for amount more than 10% of its
capital and reserves
– Need Registrar approval to grant loans or make investments for
amount more than 25% of its capital and reserves to any person
 Prudential requirements
• Other relevant sections of the Banks Act
• Section 60B: requires establishment of suitable
corporate governance process
• Section 64: must appoint a risk and capital management
committee that assists the Board to ensure that sound
corporate governance practices
Prudential supervision and the SREP
• Monitor, enforce compliance with legal prudential
requirements and good-practice standards
• Take risk profile, risk management, risk mitigation systems
of bank into account
– Bank’s Board accepts ultimate responsibility for its risk profile
– Meetings and feedback between Board, BSD structured around a
supervisory framework – SREP
– Obtain directors’ views and perspectives on the relevant risk
profiles, risk management and risk appetite of the bank
– BSD gives feedback to Board on current supervisory issues
Supervisory Review and Evaluation Process
(SREP)
• Implemented in 2008 by the BSD
• Classifies banks quarterly basis as high-risk, medium-risk or
low-risk
• Determines length of the SREP cycle and the supervisory
resources to be allocated
• Due to potential systemic repercussions of failure, a large
high-risk bank will always be allocated more supervisory
resources than a small high-risk bank
 Proposed twin peaks model
• 2011 National Treasury policy document: proposals to
strengthen financial sector regulation in SA in response to
lessons learnt from 2007/08 GFC and the challenges facing
SA economy
• Regulatory framework in SA highly fragmented and
interconnected, especially given Bancassurance model
• Main proposal: ‘twin peaks’ model -one regulator
(PA)tasked with prudential regulation, another tasked with
market conduct regulation (FSCA)
 Proposed twin peaks model

• To ensure that consumer protection receives

sufficient priority
• Separate focus on financial stability, primary
regulatory responsibility to the SARB
• Financial Stability Oversight Committee (FSOC) to be
created, to be chaired by SARB Governor
Implementation of twin peaks in SA
Implementation of twin peaks in SA

Phase 1a and 1b planned by 2015/16

• 1a: creation of twin peaks authorities ( PA and FSCA)
• 1b: establishment of powers of these authorities
• BSD and FSB(SA) will cease to exist, but few changes
to existing industry-specific legislation such as Banks
Act
• Authority responsible for the existing acts will change
Implementation of twin peaks in SA
Phase two : 2016-2018
• Legal frameworks developed , harmonised
• institution-specific laws will be replaced by new
overarching laws
• Streamlined system of licensing, regulating and
supervising financial institutions, while providing new
approach to the enforcement of financial regulation,
supervision
Implementation of twin peaks in SA
• Continuous consultation, co-ordination between
different regulatory authorities required
• Memorandum of Understanding between authorities
• Council of Financial Regulators (CFR):
– Representatives from PA, FSCA, NCR, SARB
• Industry-specific prudential legislation probably remain
relevant for first phase of the twin peaks reform process
 Proposals of FSR Bill( 2014)
Licensing - license from FSCA if financial services provider; license from PA if
financial products provider
• Standards and Regulatory requirements e.g. capital adequacy, solvency
standards
• issued as subordinate legislation (as opposed to legislation by a government
department) - can be modified relatively easily and quickly
• Supervision - information-gathering, onsite inspections and investigations
Administrative/enforcement actions
• Remedial actions when breach of financial regulation law is detected
• Consumer recoursen- reform of the Ombud system
To be centralised, harmonised and strengthened
 Market Conduct Regulation in SA
• Aim: ensure financial institutions behave appropriately
towards their clients by treating them fairly
• Address imbalance of power between consumers and
financial institutions
• Rationale : opaque nature of financial products-generic
consumer protection regulation not enough
• Credence nature : quality of financial services can often
only be judged at considerable cost, after considerable time
Specific market conduct measures
• Rules on how financial services are sold
• Prescribing who can sell financial services
– Mandatory information disclosures
– Honesty and integrity requirements
– Guidelines for quality, objectivity of advice
– Financial literacy, educating consumers about costs of credit
– Enforcing credit cost disclosure regulations
 Recourse Measures
If consumer detriment does occur:
• Internal dispute resolution mechanisms (complaints
department)
• Courts
• Ombud schemes. E.g. banking, credit information, short-
term insurance and long-term insurance, Pension Funds
Adjudicator (PFA), the Registrar of the Council for Medical
Schemes, FAIS Ombud
 Current legislative framework for
consumer protection

• Financial Advisory and Intermediary Services Act 37

of 2002 (FAIS)
• National Credit Act 34 of 2005 (NCA)
• FAIS protects consumers buying investment
products
• NCA protection for consumers of credit products
 FAIS Act 37 of 2002
Protect consumers by regulating the financial institutions and
financial services providers (FSPs), that sell financial products
FSPs cannot operate without FAIS license
• Provisions regarding contents, structure of financial advice
• Enable clients to make informed decisions
• Reasonable financial needs appropriately and suitably
satisfied
• Section 14: debarment upon failure to comply with Act
• Mainly applicable to banks divisions that sell and provide
advice on insurance and investment products
 FAIS Fit and Proper Requirements
Character qualities associated with integrity and honesty
Competency, operational ability to fulfil FAIS requirements:
• Financially sound
• Minimum formal academic qualification
• Minimum years of appropriate experience
• Pass prescribed regulatory examinations (or RE exams)
Continuous Professional Development (CPD) requirements
• Ongoing business concern (fixed business address, adequate
communication facilities, money laundering control system)
 FAIS CODES OF CONDUCT
• Codes deal with:
– Disclosure about risks associated with products,
– Avoidance of misleading advertising
– Protocol for safe-keeping of funds and documentation
– ‘The General Code of Conduct for Authorised Financial Services
Providers ’ : “must at all times render financial services honestly, fairly,
with due skill, care and diligence, and in the interests of clients and
the integrity of the industry.”
• FAIS promulgated to protect rights of client
• FSP itself is also protected, especially in cases where disputes
arise
National Credit Act 34, 2005
• Effective 1 June 2007
• Replaced Usury Act of 1968, Credit Agreements Act
of 1980, Exemption Notice
Purpose:
• “promote and advance the social and economic
welfare of South Africans, promote a fair, transparent,
competitive, sustainable, responsible, efficient,
effective, and accessible credit market and industry.”
NCA promotes protection of consumers
as follows:
• Accessible credit markets
• Consistent treatment of credit products and providers of credit.
• Encourage responsible borrowing
• Discourage over-indebtedness by consumers
• Discourage reckless lending from credit providers
• Promote equity between consumers and credit providers
• Addressing imbalances related to deceptive conduct by credit
providers and credit bureaux
• Improve the administration of credit bureaux
• Promote system of debt-restructuring
Role of National Credit Regulator (NCR)

• National Credit Regulator (NCR) responsible

regulatory authority
• Independent and impartial body
• Responsible to conduct research, disseminate data
related to credit trends
• Important role in market conduct regulation under
the twin peaks framework
Chapter 4 of NCA : consumer rights
Right to apply for credit
• Protection against discrimination
• Right to reasons for credit being refused
• Right to information in the official language of applicant
• Right to receive copies of the documents relating to credit
agreement
• Right to have your information treated as confidential
• Right to have clear outline of all applicable costs related to
the credit
• Right to access and challenge credit records and information
 Reckless lending
• Clients should not be misled into taking up credit that they
cannot afford
• Banks should conduct thorough credit assessment of each
client to determine their repayment ability
• If client fails to fully and truthfully disclose relevant
information to the credit provider, a credit agreement will
not be declared reckless
• Implications for credit marketing practices
• Phrases such as ‘low cost credit’ must be explained and
justified by providing complete information regarding the
true cost of the credit
 Capped interest rates, fees and
charges
Chapter 5 provisions cap total cost of credit agreements.
• Maximum interest rate based on a formula based on repo rate
• in duplum rule ( ‘double the amount’) applies
• Maximum permissible interest rate is certain % per month for
certain types of agreements. E.g. incidental credit agreements
• Other fees
– Initiation fee
– Monthly service fee
– Loan protection policy
Capped interest rates, fees and
charges
 Marketing practices
• Door-to-door selling, uninvited canvassing not allowed
• Marketing must be clear, simple, understandable
Must disclose
• All relevant costs related to the credit agreement-
• Instalment amount, number of instalments, breakdown of costs (interest
rate, fees and compulsory insurance), final residual or balloon payment
• When ‘cheap credit’, ‘affordable credit’ used: specific information related to
total cost should be provided
• Entitled to receive detailed written quote for comparison purposes
 Negative option marketing
• Credit provider makes offer to a client on the basis that the offer
is accepted unless the client declines the offer
NCA section 74 prohibits following:
• Offer to enter into a credit agreement which comes into effect
unless the client formally declines the offer
• Increase in credit facility which comes into effect unless the
client formally declines the increase
• Alters credit agreement which takes effect unless the client
formally declines the alteration
Agreement entered into as a result of negative option marketing is
unenforceable according to the NCA
 Debt counselling
• NCA gives clients who are unable to service their debt
obligations the right to apply for financial
management and debt counselling to assist with
restructuring debt repayments
• Either voluntary or insistent by order of the court
Recent changes to the NCA
• In response to certain issues in SA credit market: reckless
lending provisions, affordability assessments, credit
bureaux
• National Credit Amendment Act of 2014 (or NCAA)
• Credit information amnesty- credit bureaux must remove
adverse credit information for their records in order to
allow consumers with impaired credit records a proverbial
clean slate to apply for new credit
• National Credit Regulations for Affordability Assessments
- legally binding criteria for affordability assessments
 NCA: Conclusions
• NCA complex ,comprehensive, major improvement
on the dated legislation preceding it
• Nature of the Act is to avoid excessive and reckless
lending and if a bank is found to do so, the
consequences thereof lie with the bank
• Contributed to a national philosophy of credit-
granting that is more risk-averse than risk-taking
 Proposed approach to market
conduct regulation
More prominent under twin peaks than under current regulatory
structure
• FSCA will replace FSB(SA), new mandate with a new regulatory and
supervisory framework
Objectives for the FSCA:
1) fair treatment to financial clients
2) efficiency and integrity of the financial system
3) financial literacy and capability
FSCA will co-operate with PA to achieve these objectives
 Principles of proposed market conduct
framework
• FSCA transparent, consultative in decision-making process
• Comprehensive , principles must be applied consistently
• Must be appropriate to particular sub-sector or activity
• Outcomes-based:
– client outcomes must be based on both principle- and rules-based
standards
• Regulatory requirements risk-based and proportional
• FSCA must be pre-emptive and react proactively
• FSCA credible deterrent to market misconduct
• Framework must adhere to international standards
 Principles proposed market conduct
framework should be based on:
• FSCA transparent and consultative in decision-making
• Comprehensive, apply underlying principles consistently
• Appropriate to the particular sub-sector or activity
• Intensive, intrusive enough to ensure rigorous regulation,
supervision
• Outcomes-based, principle- and rules-based standards
• Risk-based and proportional
• Pre-emptive and react proactively
• Effective, credible deterrent to market misconduct
• Adhere to international standards regarding market conduct
 Proposed market conduct legislative
framework
• Currently ten Acts under ambit of market conduct
regulation
• Proposal that this be consolidated into two Acts-
Financial Sector Regulation Act and the Conduct of
Financial Institutions Act
• Reduces compliance costs -fewer acts and reporting
to single market conduct regulator
 Proposed legislative framework: key
components:
• A clear definition of the regulatory perimeter
– Cover all financial products, able to respond to all sources of conduct risk.
Institutions regulated by PA also need to be regulated by FSCA.
• Licensing and authorisation
– Activity-based authorisation with tough fit +proper standards
– Single license to perform specified services to specific types of consumers
• Outcomes-based supervision
– FSPs to be tested on delivery of TCF outcomes, pricing efficiency, support
to real economy
– FSCA may be required to consider macroeconomic issues
– Proactive and pre-emptive, prevent consumer detriment before it occurs
 Proposed legislative framework: key
components
• Setting regulatory standards (conduct standards)
– Flexible, broad subordinate legislation or standards
– e.g. standards of business conduct, fit and proper person requirements,
disclosure requirements
– FSCA will replace powers of FSB(SA) to issue Notices, Board Notices and
Rules with regards to conduct standards over time
• Information-gathering
– To obtain better and pre-emptive insights into conduct risks ,e.g.
understanding business models, incentives and drivers of conflict
– May need information beyond that supplied by regulated entity
 Proposed legislative framework: key
components
Enforcement and administrative action
• Breaches of rules-based standards and principles based standards
• Increased reliance on judgement-based decision making
• Proposed twin peaks framework is ambitious
• Challenge is to consolidate an existing regulatory framework with
proposed framework that is the natural result of gross misconduct
in the lead-up to the GFC
• Requires concerted effort from all involved stakeholders
 Treating-Customers-Fairly
• Currently TCF apply to non-bank institutions. Under twin peaks,
TCF will form part of regulatory framework for banks
• Activities- and outcomes-based approach
• Institutions must demonstrate that they delivered specified fairness
outcomes to their consumers
• Risk-based- intensity of supervision will be determined by the risk
that a bank will not treat their customers fairly AND Vulnerability
of clients to potential abuse
• Final desired outcome of TCF: ensure that the financial services
needs of clients are appropriately met
 TCF approach: 6 fairness outcomes
• Clients confident they are dealing with institutions that have their
fair treatment embedded in their organisational culture
• Financial products must be designed to meet needs of identified
client groups, targeted accordingly
• Clients must be given clear information and be kept appropriately
informed before, during and after purchasing a financial product
• Advice must be suitable
• Financial products must perform as clients expect them to
• No unreasonable post-sale barriers
 FINANCIAL INCLUSION AND FSC
• SA financial sector committed to promoting BEE by voluntarily
drawing up Financial Sector Charter (FSC)
• Came into effect in January 2004
• Aims to provide increased access to financial services for
previously disadvantaged households and communities
• Based on six pillars
– Charter Council to oversee implementation of the FSC
– Following negotiations from 2007 to 2011, a Financial Sector Code
was published in the Government Gazette in 2012
– Transformed FSC, a voluntary agreement, into legally binding
Financial Sector Code under BBBEE Code
 SIX PILLARS OF FSC
• Human Resource Development
• Procurement
• Enterprise Development
• Access To Financial Services
• Empowerment Financing
• Equity Ownership And Control
• Corporate Social Investment
 Financial Sector Code Scorecard
• Integral part of compliance
• Set of indicators to measure the success of empowerment
initiatives in banking sector
• Used by banks for self-assessment and Charter Council to
evaluate the implementation of BBBEE
– Based on 6 pillars of original FSC
– BUT preferential procurement of goods and services is split into a
preferential procurement and enterprise development to form
seven pillars in total
 COMBATTING MONEY LAUNDERING IN SOUTH
AFRICA
• Definition of Money laundering offence : origin of funds (or
proceeds) obtained from illegal activities is disguised
• Usually takes place in three stages:
– placement stage - illegal funds placed into formal financial system
– layering stage - source and ownership of the funds is purposefully concealed or disguised
– integration stage - first two stages are successful and the funds are integrated into the
legitimate economic and financial system
• Money launderers often receive professional assistance
• Combatting money laundering requires a global policy response due to its
ability to adapt to changing business and legal jurisdictions
 AML: International regulatory bodies
• Financial Action Task Force (FATF) established in 1989 by G-7
summit
• 40 Recommendations to strengthen international co-operation
against financial crime
• Issued Eight Special Recommendations on Terrorist Financing
after 9/11
• SA : FATF member since 2003, committed to implement
international standards to combat money laundering, terrorist
financing
• FATF created Financial Intelligence Units (or FIUs) for member
countries to attack financial crime through co-operation,
including exchange of information and sharing of expertise
 SA’s anti-money laundering legal framework

• FICA
– Detailed money laundering control obligations for “accountable institutions”
• POCA
– defines the general money laundering offences
• Financial Intelligence Amendment Act 11 of 2008
– Greater penalties upon contravention of the Act. E.g. imprisonment for up to 15
years or fines for up to R100 million
– BSD enforces all FIC-issued guidance notes, circulars and announcements
– Proactive assessments of compliance with money laundering provisions
– Money Laundering Advisory Council (MLAC) advise Minister of Finance on best
practices, act as a forum for debate on combatting money
 Control measures under FICA
• Suitably verifying the identity of clients
• establishing the source of the funds in question
• Reporting any suspicious activity to FIC
• FICA requires banks to have:
– Internal framework that enables banks to identify and verify the identity of
their clients. Keep records of business relationships
– Develop internal system to identify suspicious, unusual or irregular
transactions that must be reported to the FIC
– Provide anti-money laundering training to its staff
– Appoint Compliance Officer that ensures compliance with FICA
 Verifying identity of clients
Section 21 “[a]n accountable institution may not
establish a business relationship or conclude a single
transaction with a client unless the accountable
institution has taken the prescribed steps to establish
and verify the identity of the client.”

SA banks allowed to take risk-based approach: the

higher the risk that a client might be involved in money
laundering activities, the higher the intensity of the
methods to verify the identity of the client
 FIC General Guidance Note on Identification
of Clients
Risk indicators that may suggest possible money laundering:
• Several bank accounts with different banks in one area
• Large cash deposits into an account of a foreign bank
• Want bank cards sent to destinations other than address on record
• Numerous accounts and makes or receives large cash deposits
• Frequently exchanges currencies
• Request unusual access to safe-deposit facilities
• Receives, disburses large cash amount unrelated to normal business
 Current Regulatory Trends in SA
Several recent laws to improve existing financial regulatory
framework
Aims
• Regulatory framework in line with international developments
• Cater for implementation of twin peaks framework
• Financial Markets Act 19 of 2012 (FMA)
• Fair, efficient and transparent financial markets
• Include custody of securities, clearing houses, market abuse,
auditing standards
 Current Regulatory Trends in SA
Credit Rating Services Act 24 of 2012
• Registration of credit rating agencies
The Financial Services Laws General Amendment Act 45 of
2013
• Ensure up-to-date financial sector legislation during twin peaks
transition
• 13 financial sector laws amended under this Act, e.g. SA Reserve
Bank Act (1989), the Financial Services Board Act (1990),
Financial Markets Act (2012)
 Deposit insurance in South Africa
• Explicit deposit insurance scheme (DIS) is seen to be a main
requirement for international best practice in financial regulation
• South Africa adopts implicit DIS – deposits are protected by the
intervention of the National Treasury and the SARB in the case of
bank failure
• Explicit DIS in South Africa considered on numerous occasions, but
the SARB remains of the opinion that the cost of having such a
scheme will be excessive and outweigh benefits
Dealing with SIFIs and Too-Big-To-Fail issue
• Regulation of Systemically Important Financial Institutions
(SIFI/ G-SIFIs) big issue in debate on regulatory reform
• Much uncertainty surrounds regulatory treatment of SIFIs
• Too-Big-To-Fail argument
– certain financial institutions are so large and interconnected that
its failure can cause severe systemic risk
• Regulators dilemma
– if they do bail-out the financial institution, they prevent significant
systemic failure; if they let if fail they set an example of market
discipline for industry at large
Dealing with SIFIs and Too-Big-To-Fail issue
• FSB requires recovery and resolution plans in place
for all SIFIs
• SIFIs must develop recovery plans
– detailing how the bank’s management plans to recover from
severe financial stress
• SARB must develop resolution
– Plans in situations where the recovery plans do not have the
desired impact
– Aim to minimise the cost to taxpayers in the event of bank failure
 The implementation of TCF
• Evolving framework to be implement on incremental, risk-
based basis
• Vulnerability of clients will determine intensity of supervision
• TCF is not legally binding, but vital next step for the
implementation of the twin peaks framework
• FSB(SA) emphasises the importance of embedding a TCF
culture in financial institutions, starting with the business
leaders and senior managers
 Proposed reform of the Ombud system
• Enhanced effectiveness of current system to ensure it is easily accessible to
consumers
• FSR Bill proposed Financial Sector Ombud Scheme Act (FSOSA) should be
repealed, provisions of Act incorporated into FSR Bill
• In the interim, all existing Ombud schemes remain in place
• Proposed FSOSA Council -single point of entry into Ombuds system
• Consolidation of Ombuds system, ensuring consistent approaches to dispute
resolution across different Ombuds
• Uncertain how this will be achieved and what proposed Ombud system will
look like
 Conclusion
Banks traditionally one of most regulated industries
Aim of financial regulation:
• maintain integrity , soundness of financial system,
• Socio-economic transformation additional aim in SA
Current regulatory structure in SA:
• SA banks regulated by several different regulators
• Proposed twin peaks regulatory structure:
– Banks to be regulated by 2 main regulators
– PA (prudential regulation)
– FSCA (market conduct regulation)
 Conclusion
• Financial regulation in SA in state of flux
• Several laws recently passed to improve regulatory framework.
• Most aim to bring the regulatory framework in line with
international developments after GFC, facilitate move to twin-
peaks
• Twin peaks to provide more streamlined financial regulation,
supervision
• Ambitious framework, successful implementation require
concerted effort from all stakeholders.
• Challenges to banks - more intrusive market conduct regulation