The Financial Sector Regulation Bill In South Africa, Second Draft: Lessons From Australia

by Dr. Andy Schmulow

The proposed reforms to financial regulation in South Africa, as embodied in the Financial Sector Regulation 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.

The De Kock Commission’s findings led to the creation of the Financial Rand, and a dual exchange rate system for South Africa (Pieter Cornelis Smit Economics: A Southern African Perspective (1996) 421). The current proposed reforms introduce two regulators for the Republic’s financial sector — a so-called ‘Twin Peaks’ regulatory model: a Prudential Authority, which ‘will supervise the safety and soundness of banks, insurance companies and other financial institutions’, and a Financial Sector Conduct Authority, which ‘will supervise how financial services firms conduct their business and treat customers’ (National Treasury Media Statement ‘TWIN PEAKS: Second draft of Financial Sector Regulation Bill and draft Market Conduct Policy Framework discussion document published for comment’ (11 December 2014)). This model was first adopted by Australia, and the South African authorities have drawn on the Australian experience (National Treasury Media Statement ‘A safer financial sector to serve South Africa better’ (23 February 2011) 28–9 and 40; Financial Regulatory Reform Steering Com- mittee ‘Implementing a twin peaks model of financial regulation in South Africa’ (1 February 2013) 22–3; Bryane Michael ‘The ‘‘Twin Peaks’’ regulatory model: The future of financial regulation?’ (March–April 2014) Banking Today 3–4).