New act creates op­por­tu­nity in the fi­nan­cial ser­vices sec­tor

The twin peaks model will pro­vide a sta­ble and ma­ture fi­nan­cial ser­vices sec­tor

Mail & Guardian - - Irfa - Alf James

The Fi­nan­cial Sec­tor Reg­u­la­tion Act (FSR Act) was signed into law by Pres­i­dent Ja­cob Zuma on Au­gust 21 2017, sig­ni­fy­ing another step in gov­ern­ment’s re­form of the re­tire­ment fund in­dus­try.

Wayne Hiller van Rens­burg, IRFA pres­i­dent and chair­per­son, says the FSR Act pro­vides the frame­work for the new “twin peaks” method of reg­u­la­tion to be in­tro­duced to South Africa’s fi­nan­cial ser­vices in­dus­try, which will sep­a­rate the reg­u­la­tory re­spon­si­bil­ity into two reg­u­la­tory author­i­ties: the Pru­den­tial Author­ity and the Fi­nan­cial Sec­tor Con­duct Author­ity that will be housed in the South African Re­serve Bank (SARB).

“At the mo­ment all South African banks are reg­u­lated by the Bank­ing Su­per­vi­sion Department of the SARB and all non-bank fi­nan­cial ser­vice or­gan­i­sa­tions, such as as­set man­agers and re­tire­ment funds, are reg­u­lated by the Fi­nan­cial Ser­vices Board. “How­ever, now, the Pru­den­tial Author­ity will reg­u­late the pru­den­tial as­pects of banks and non-bank fi­nan­cial in­sti­tu­tions alike, while the Fi­nan­cial Sec­tor Con­duct Author­ity will reg­u­late mar­ket con­duct and fair treat­ment of fi­nan­cial con­sumers.

The Re­serve Bank will over­see both author­i­ties,” says Hiller van Rens­burg.

He con­tends that the big­gest chal­lenge of the new twin peaks model will be to change the think­ing and the in­ter­nal struc­tures of the ex­ist­ing or­gan­i­sa­tions so that they trans­form smoothly to ac­com­mo­date their new fo­cus and func­tion.

Abi­gail Viljoen, Fi­nan­cial

Ser­vices Africa Risk Man­age­ment leader at Ernst & Young, says the pri­mary aim of im­ple­ment­ing the pro­posed twin peaks model is to pro­vide a sta­ble and ma­ture fi­nan­cial ser­vices sec­tor, which pro­vides ac­ces­si­ble, af­ford­able and well-de­signed prod­ucts and ser­vices that meet con­sumer needs.

“There will be ben­e­fits from the new su­per­vi­sory ap­proach for the en­tire fi­nan­cial sec­tor, in­clud­ing con­sumers, reg­u­lated firms and the reg­u­la­tors them­selves. How­ever, as with any change of this na­ture, there will in­evitably be chal­lenges in im­ple­ment­ing the new struc­ture and its as­so­ci­ated re­quire­ments,” adds Viljoen. Hiller van Rens­burg con­tends that while the FSR Act is un­likely to al­ter the pre­vail­ing reg­u­la­tory frame­work with im­me­di­ate ef­fect, the act em­pow­ers the two author­i­ties to pub­lish pru­den­tial and con­duct stan­dards that will need to be com­plied with, and pro­vides a new reg­u­la­tory frame­work that should al­low for the cre­ation and reg­u­la­tion of fi­nan­cial prod­ucts that are not nar­rowly de­fined and con­se­quently reg­u­lated.

“We look for­ward the a rein­vig­o­rated fi­nan­cial ser­vices sec­tor with new and ex­cit­ing prod­ucts that are more suited to a broad range of South Africans,” says Hiller van Rens­burg.

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