The Act, also known as the ‘Twin Peaks’, will see the existing Financial Services Board (FSB) transformed into a dedicated market conduct regulator, called the Financial Sector Conduct Authority, and the establishment of the Prudential Authority, which will be housed in the South African Reserve Bank (SARB).
In addition to jurisdiction over all financial institutions, the Act gives the two authorities a range of supervisory tools and ensures that there is co-operation and collaboration with the National Credit Regulator, the Financial Intelligence Centre and the SARB.
The move closely mirrors the UK’s Financial Services Authority’s (FSA) 2012 transformation into the Financial Conduct Authority (FCA).
Delays
The initial December 2014 Financial Sector Regulation Bill was the first in a series of bills towards the implementation of the Twin Peaks model.
It followed two policy papers on lessons from the 2008 global financial crisis:
- A Safer Financial Sector to Serve South Africa Better (National Treasury, February 2011); and,
- Implementing a twin peaks model of financial regulation in South Africa (Financial Regulatory Reform Steering Committee, February 2013).
In July 2016, the FSB confirmed that the first phase had been postponed for a year. It had been due to come into effect in August 2016.
The Pretoria-based watchdog said the delay was because the latest draft of the FSR Bill, published in October 2015, was still awaiting parliamentary approval.
Aimed at overhauling South Africa’s financial services sector, the FSR legislation proposes replacing the current commission system with a fee-based model similar to the UK.
The final draft of the FSR included 14 proposals as part of the first phase of RDR. It is not currently known what changes, if any, were made to the final version signed by Zuma.
The FSB did not respond when contacted by International Adviser.
Act aims
The government said the Act aims to achieve a financial system that works in the interests of customers and supports balanced and sustainable economic growth in South Africa by establishing, in conjunction with other financial sector laws, a regulatory and supervisory framework that promotes:
- Financial stability;
- The safety and soundness of financial institutions;
- The fair treatment and protection of financial customers;
- The efficiency and integrity of the financial system;
- The prevention of financial crime;
- Financial inclusion;
- Transformation of the financial sector; and,
- Confidence in the financial system
