New act creates opportunity in the financial services sector
The twin peaks model will provide a stable and mature financial services sector
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.