Finance Minister Nhlanhla Nene tabled the Financial Sector Regulation (FSR) Bill in Parliament, on Tuesday, after taking into account public comments.
The FSR Bill gave effect to the government decision in 2011 to shift to a Twin Peaks model of financial sector regulation for South Africa, as outlined in the policy document.
Twin Peaks was a comprehensive and complete system for regulating the financial sector and represented a decisive shift away from a fragmented regulatory approach, while reducing the possibility of regulatory arbitrage, or forum shopping, and closing gaps in the regulatory system.
Following the global financial crisis in 2008, the Bill aimed to make the financial sector safer and more effective in the interests of all South Africans, by reducing potential threats to financial stability and better protecting customers by building financial institutions that treat their customers fairly.
This was also in line with the International Monetary Fund’s Financial Sector Assessment Programme recommendations to South Africa to define clear and comprehensive institutional, governance and accountability arrangements for prudential and market conduct regulation.
The tabling of the Bill was the first step in the process to implement the Twin Peaks system, with Parliament now expected to finalise and enact the Bill.
Under the Twin Peaks model, two regulators would be established – a Prudential Authority within the South African Reserve Bank (SARB) and a new Financial Sector Conduct Authority (FSCA).
The Prudential Authority would supervise the safety and soundness of financial institutions, while the FSCA would supervise how financial services firms conducted their business and treated customers.
Further, the SARB would oversee financial stability within a policy framework agreed with the Finance Minister.
The Twin Peaks system of regulation would, when fully phased in, focus on a more harmonised system of licensing, supervision, enforcement, customer complaints (including ombuds), appeals, and consumer advice and education across the financial sector.
Ensuring that there was coordination across all regulators in the financial system is an important supporting pillar to the reform. These regulators include the Prudential Authority and FSCA, the National Credit Regulator, the Financial Intelligence Centre, the Council for Medical Schemes and the SARB.
The Bill would be considered by the Standing Committee on Finance in Parliament, which was expected to invite public comments and submissions on the Bill.
The National Treasury expected the Bill would be enacted next year, to enable implementation soon thereafter.