A Comparative Analysis of the Design and Implementation of the Twin Peaks Model of Financial Regulation in South Africa and Australia

• Published in: Potchefstroom electronic law journal Vol. 27; no. 1; pp. 1 - 33
• Main Authors: Chitimira, Howard, Mavhuru, Luck
• Format: Journal Article
• Language: English
• Published: North-West University (Potchefstroom Campus) 10-09-2024; North-West University
• Subjects: consumer protection; financial regulation; Law; prudential authority; Twin Peaks; financial regulation; consumer protection; Twin Peaks; prudential authority
• ISSN: 1727-3781; 1727-3781
• DOI: 10.17159/1727-3781/2024/v27i0a17256

Abstract In response to the 2007-2009 global financial crisis, South Africa, like most other countries, embarked on a journey of financial regulatory reform. This transformation has seen the country shift away from a silo approach, where various sectoral regulators supervise different financial institutions, towards the Twin Peaks model of financial regulation. The term “Twin Peaks” refers to the separation of regulatory functions between two independent regulators. For instance, one regulatory agency is responsible for the supervision of the safety and soundness of financial institutions, and the other is focussed on the regulation of business conduct. The Twin Peaks model is designed to provide the benefits and efficiencies of an integrated approach while simultaneously addressing inherent conflicts between the objectives of the safety and soundness of the financial system and consumer protection. The Financial Sector Regulation Act provides for the Twin Peaks model in South Africa. This Act positions South Africa as one of the first developing countries to adopt the model. On the other hand, Australia is the pioneer of the model since it implemented it in 1998. Its implementation in Australia, much as in South Africa, involved the separation of regulators for prudential soundness on the one hand and market conduct and consumer protection on the other. In this article, the authors provide a comparative analysis of the design and implementation of the Twin Peaks model in Australia and South Africa. They argue that while there are minor differences between the design and implementation of this model in Australia and South Africa, the model was customised and implemented to align with the specific needs of each country