Financial Regulation: Is Australia’s ‘Twin Peaks’ Model a Successful Export?

by Dr. Andrew D. Schmulow

published electronically in The Interpreter, 1 March 2016.

It is little known outside financial circles, but Australia is enjoying some success on the global stage as a policy exemplar.

Australia’s model for the regulation of the financial system – the Twin Peaks model – is being emulated world-wide. So-called because the model is characterized by two equal and independent peaks: the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA). Because Australia fared relatively well during the GFC and because our regulatory model has been credited with much of our success, a number of other countries have adopted the model (the UK, New Zealand, South Africa) or have signaled a desire to adopt it (South Korea, Hong Kong, and the federal level of the EU).

Under the Twin Peaks model, one peak is responsible for financial system stability (in our case, APRA) while the other (ASIC) is responsible for good market conduct and consumer protection. Within this system the Reserve Bank remains partly responsible for financial system stability, and remains the lender of last resort. So in fact, the model is a misnomer. It is in fact more correctly called the Triple Peak model.