‘TWIN PEAKS’ WILL END SILO REGULATORS

THE SA Institute of Chartered Accountants (Saica) said the introduction in South Africa’s economy of the “Twin Peaks” supervisory framework would end the days of “silo regulators”.

Policy-makers believe the Twin Peaks supervisory framework accords sufficient priority to transparency, market integrity and consumer protection.

“The days of silo regulators within the financial services sector have ended. Twin Peaks has established a dedicated prudential regulatory authority (the Prudential Authority) in the South African Reserve Bank and a new Financial Sector Conduct Authority (FSCA),” said Lesego Mafadza, Derek Vice, Finn Elliot and Nicky Kingwill of the Saica Banking Group Project.

“The current Financial Services Board (FSB) will be transformed into the FSCA.

“The Prudential Authority will be responsible for regulating financial institutions’ solvency and liquidity, while the FSCA will regulate how firms conduct their business, design and price their products and treat their customers,” they said.

In adopting the regulatory framework, South Africa joins Australia, Canada, the Netherlands and the UK, among others, in implementing this model of financial sector regulation.

South African insurers, pension funds, collective investment schemes and other financial services providers were regulated by the FSB, whereas banks were regulated by the SA Reserve Bank.

Each institution was required to comply with its own industryspecific legislation.

“This will assist with the prudential supervision of financial services groups – which currently include banks, insurers and other financial institutions with more than one regulator.

“The establishment of the Prudential Authority is an essential precursor to enacting the new Insurance Bill,” said Saica.

The insurance bill is to replace the existing short-term and longterm insurance acts, but it is expected that certain sections of the act will remain in place.

“One of the significant changes to be introduced is a new licensing regime. All licence holders under the existing insurance acts will be required to apply for licences in terms of the new framework.

“Licences will not be granted automatically. The regulator must be satisfied that an applicant has the necessary resources and expertise to conduct a particular line of business before it will issue a licence,” said Saica.

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