Twin Peaks: A Theoretical Analysis

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by Dr. Andrew D. Schmulow

SSRN Electronic Journal, 2015.

This paper provides a theoretical analysis of the twin peaks method of financial system regulation, with particular reference to the Australian iteration of the model. This includes a description of how twin peaks functions, its historical development, and its strengths and weaknesses. An analysis is also provided of an important bifurcation in the Australian model, as it as has been emulated elsewhere in the world, namely the jurisdictional location of the bank regulator.

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Also published as a working paper in “Research Working Paper Series, Centre for International Finance and Regulation (CIFR) “.

Protection of Financial Consumers in Australia

by Dr. Andrew D. Schmulow and James O’Hara

SSRN Electronic Journal, 2018

Legal protection of consumers of financial products and services in Australia.

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The Financial Sector Regulation Bill in South Africa: Lessons from Australia

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by Dr. Andrew J. Godwin and Dr. Andrew D. Schmulow

SSRN Electronic Journal, 2015.

The proposed reforms to financial regulation in South Africa, as embodied in the Financial Sector Regulation Bill, (second draft, 10 December, 2014) (‘FSR Bill’), represent the most important reforms to South Africa’s financial regulatory architecture since the 1987 de Kock Commission. The degree to which these reforms succeed will determine the extent to which South Africa can maintain financial stability, and manage the effects of a future financial crisis.

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Also published as a working paper in “Research Working Paper Series, Centre for International Finance and Regulation (CIFR) “.

Approaches to Financial System Regulation: An International Comparative Survey

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by Dr. Andrew D. Schmulow

SSRN Electronic Journal, 2015.

This article provides an analysis of the four systems of financial system regulation currently in use internationally, with case studies illustrating each system. Analysis is provided of the strengths and weaknesses of each. Research indicates that the ‘Twin Peaks’ system is the superior method of financial system regulation. However, this paper also concludes, by reference to failings observed in ‘Twin Peaks’ arrangements to date, that ‘Twin Peaks’ alone is no panacea against financial crises, or market and consumer abuse. It is merely the best form of regulatory architecture. Other factors, such as the capacity and willingness of the regulators to discharge their mandate, even within a sound regulatory architecture, are as important to the success of financial system regulation, as evidenced by the failures of the UK financial regulatory system, around the time of the Global Financial Crisis, and as evidenced by the success of the Monetary Authority of Singapore, despite Singapore’s sub-optimal regulatory structure.

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Also published as a working paper in “Research Working Paper Series, Centre for International Finance and Regulation (CIFR) “.

Curbing reckless and predatory lending: A statutory analysis of South Africa’s National Credit Act

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by Dr. Andrew D. Schmulow

Competition and Consumer Law Journal, Vol. 24, no. 3, 2016.

This article provides a statement and an analysis of South Africa’s statutory provisions aimed at curbing reckless lending, and preventing predatory lending, to financial consumers. The focus of the article is on the statutory mechanisms for combatting reckless and predatory lending, including a critique of the success or otherwise of the implementation of the relevant legislation. The article aims to provide a comparative analysis of what is, overall, an innovative and effective regime, the aim of which is to protect vulnerable financial consumers from reckless and predatory lending practices. As such, it is hoped, that the article will provide useful techniques for the protection of borrowers in other common law jurisdictions, such as Australia, Canada and the United States, or indeed wherever vulnerable consumers of finance are liable to be exploited.

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Also published in SSRN Journal.

Financial Regulatory Governance in South Africa: The Move Towards Twin Peaks

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by Dr. Andrew D. Schmulow

African Journal of International and Comparative Law, Vol. 25, no. 3, 2017, pp: 393-417.

This article examines the implementation of the Twin Peaks model of financial system regulation in South Africa, the purpose of which is to create a financial system stability regulator, and a financial system consumer protection and market conduct regulator. It examines the historical development of Twin Peaks and its regulatory enforcement principles. It then analyses the similarities and differences between Twin Peaks in Australia (upon which the South African reforms are based) and South Africa. Finally the article provides concluding observations.

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Also published in SSRN Journal and as a working paper in “University of Western Australia – Faculty of Law Research Paper Series“.

Retail Market Conduct Reforms in South Africa Under Twin Peaks

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by Dr. Andrew D. Schmulow

Law and Financial Markets Review, Vol. 11, no. 4, 2018, pp: 163-173.

This article examines retail market regulatory reforms currently underway, as part of the implementation of a Twin Peaks regulatory model in South Africa. A brief account is provided of the history of these reforms, followed by an analysis of the normative goals put in place for a new market conduct and consumer protection regime; and the developmental needs that inform those goals. Thereafter the article explores the inter-relationship between the existing credit regulator and the soon to be established Financial Sector Conduct Authority. An analysis is then provided of accountability mechanisms, as well as failures exhibited by those mechanisms in the UK and Australia. Finally an argument is made for a “regulator for the regulators”, in order to address past regulatory failures.

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Also published in SSRN Journal and as a working paper in “University of Western Australia – Faculty of Law Research Paper Series“.

Regulating the Regulator : Improving Consumer Protection under a Twin Peaks Regulatory Framework

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by Dr. Andrew D. Schmulow

International Review of Financial Consumers, Vol. 3, no. 1, 2018, pp: 1-14.

Australia is in the midst of a financial regulatory crisis. Evidence of malpractice, fraud, criminality, contempt for the law, and the abuse of consumers on an industrial scale, all while Australia’s Twin Peaks regulators looked on, has come as a shocking surprise. The implications stretch well beyond Australia: they are relevant wherever the Australian ’Twin Peaks’ model has been adopted or is under consideration. This article argues that the Twin Peaks model must be analysed from the perspective of regulatory design, as well as implementation. The design – the architecture of Twin Peaks – remains optimal. However the implementation – the plumbing – requires urgent reforms. Drawing on the work of notable international scholars, this article proposes a new accountability framework for the two, peak regulators, in order to enhance their efficacy. In the process of rescuing Twin Peaks from its current inadequate plumbing, consumers may expect to enjoy levels of protection commensurate with those of a developed economy possessed of rule of law.

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Twin Peaks 2.0: reforming Australia’s financial regulatory regime in light of failings exposed by the Banking Royal Commission

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by Dr. Andrew D. Schmulow, Dr. Karen Fairweather and Prof. John Tarrant

Law and Financial Markets Review, Vol. 12, no. 4, 2018, pp: 193-202.

In November 2017 the Federal government established a Royal Commission into Australia’s financial services industry that has become widely known as the Banking Royal Commission. The Commission has, during its hearings, and in its recent Interim Report, exposed serious misconduct and poor regulation in Australia’s financial services industry. The authors argue that the recommendation of the 2014 Financial System Inquiry that there be an Assessment Board to provide continuous oversight of the financial regulators, APRA and ASIC, is an effective solution to the regulatory failures exposed by the Banking Royal Commission. The benefits to Australia of the establishment of an Assessment Board are clear, and include enhanced accountability, improvements in the regulator’s culture, prevention of regulatory capture, and enhanced capacity to prevent financial crises. The introduction of an Assessment Board in Australia would serve as a timely and highly effective adjunct to the current Australian Twin Peaks financial regulatory architecture comprising APRA and ASIC.

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South Africa’s National Credit Act: Successes (and Failures) in Preventing Reckless and Predatory Lending

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by Dr. Andrew D. Schmulow, Tanya Ann Woker and Prof. Corlia van Heerden

Journal of Business Law, Vol. 2019, no. 2, 2018, pp: 122-139.

This paper provides an analysis of South Africa’s statutory provisions aimed at preventing reckless and predatory lending to consumers. The focus of the paper is on the statutory mechanisms for combatting such lending, including a critique of the success or otherwise of the legislation’s implementation. The paper aims to provide a comparative analysis of an innovative approach aimed at protecting vulnerable consumers. As such, it is hoped, that the paper will provide useful techniques for the protection of borrowers in other common law jurisdictions, or indeed wherever vulnerable consumers of finance are liable to be exploited.

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Also published in SSRN Journal.