Twin peaks to date


The 2008 Global Financial Crisis (“Financial Crisis”) may have come and passed and the worst thereof behind us but the world economy continues to face financial challenges. In efforts to plug the gaps experienced during the Financial Crisis and guard against similar financial crisis, the National Treasury (“Treasury”) drafted and proposed a Bill known as the Financial Sector Regulation Bill (“FSR Bill”) commonly known as “Twin Peaks” Bill.

By way of background, the FSR Bill was first introduced in the form of a policy paper, entitled “A safer financial sector to serve South Africa better” published by the Treasury in 2011. In December 2013, a first draft Bill was published for public comment. Taking into consideration comments made during the first round of public consultation, a revised version (second draft) was published for another round of public comment in 2014. The Bill is currently before the Standing Committee on Finance (“SCOF”) for their review and to allow SCOF to make recommendations before sending it to the National Assembly for further review.

In essence, the Bill seeks to bring regulation of services relating to banking, insurance, pension, collective investment schemes, credit industry etc. under the umbrella-regulation. This means that all these services will eventually fall under the ambit of a single sector (i.e. Financial Sector).


As indicated above, the primary purpose of the Bill is to establish a twin peak approach designed to underpin a comprehensive regulatory system with the following two main aims:

  • strengthen financial safety and soundness of financial institutions by creating a dedicated Prudential Authority (PA); and
  • to better protect financial customers and ensure that they are treated fairly by financial institutions by creating a dedicated market conduct authority – the Financial Sector Conduct Authority (FSCA).

If approved, the Bill will bring about a number of changes in the manner in which the affected institutions conduct business. To reduce risks and simplify the implementation process, the Treasury proposed implementing the Bill in two phases as opposed to one.

During phase 1, the focus will be on who regulates. This phase of implementation will see two regulators (enforcement peaks), namely PA and FSCA, being established. While the PA (proposed SARB unit) will be concerned with the safety and soundness of individual firms and aim to ensure financial firms are run prudently, the FSCA will be concerned with how individual firms behave in treating their customers. The current Financial Services Board will cease to exist and its prudential responsibilities will be transferred to the PA.

Moving away from the current position in relation to ombud system, the Bill proposes a single and unified Ombudsman. In brief, there is currently an ombud for each industry or sector and that will be done away.

During phase 2, the focus will be on how the regulators regulate and what they regulate. These include anything around (i) issuing regulatory requirements, (ii) licensing, (iii) supervising regulated entities and (iv) taking enforcement actions.

Credit providers take a particular interest in the Bill as credit products and services will (in terms of the current draft) also be included within the ambit of the new law. This of course begs the question on how compliance with the National Credit Act will be enforced since the Bill does not take away the powers of the National Credit Regulator in terms of the NCA to regulate and enforce compliance.

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