Abstract
Financial stability is a vital component of a healthy economy. Section 33 of the Financial Sector Regulation Act 9 of 2017 authorises the Prudential Authority to interfere in the activities of financial institutions in order to alleviate risks in procedure and ensures financial system’s stability. Among the interventions is increased oversight, regulatory enforcement actions, and preventive steps aimed at mitigating potential dangers lest they increase. With the overlap of the SARB’s mandate in maintaining financial stability, several analyses have demonstrated that the Prudential Authority’s measures have helped to maintain financial stability by taking proactive approach to risk management.
The Authority has successfully identified and addressed weaknesses by utilising a variety of measures such as stress testing, higher capital requirements, and corrective actions. The measures aided in the detection of potential risks and facilitate prompt responses to limit their consequences. Be that as it may, the efficacy of these measures of interventions is also determined by the ability to strike a balance between regulatory control and operational autonomy of financial institutions. While tough regulations are required to ensure stability, too restrictive actions may unintentionally stifle the sector’s innovation and growth.
This study in essence interrogates the prudential functions and measure of the Prudential Authority with specific focus on its role in maintaining financial stability. Objectives, powers and role of the Prudential Authority with regards to the maintenance of financial stability will be much considered apart from those of the Central Bank in the said maintenance.