Abstract
The effects and impact of the recent global financial crisis, are yet to fade away as being something of the past. Financial markets worldwide, in particular the major first world countries, are still trying to uncover the real causes that led to the crisis and how best to innovate with new risk mitigants to prevent such a catastrophic fallout from repeating itself. Reformed financial laws were being proposed and passed swiftly to protect the governments as well as its citizens from the so-called bailout packages. It is against this backdrop that there has been a concerted effort by the G20 countries to urgently propagate the reform of the Financial Regulatory environment. Whilst to a large extent it can be argued that South Africa may not have been directly impacted by the crisis at the time, its regulatory landscape as an emerging economy was and is by no means fool-proof. As a member of the G-20 countries South Africa is also obliged to align and review its financial regulatory laws as its financial markets also operate on a global scale. The South African financial markets framework and structure is largely similar in nature to its global counterparts, although on a smaller scale and less innovative. My dissertation sets out the global regulatory reaction following the global financial crisis and its challenges. In particular I deal with the review and intended reforms of the South African financial sector and its prudential regulation. The reforms proposed for South Africa are contained in the Financial Sector Regulation Bill. This bill proposes the “Twin Peaks” model of financial regulation. The Twin Peaks model refers to the creation of two dominant regulators for the financial sector, the Prudential Authority and the Financial Sector Conduct Authority. This regulatory reform is intended to bolster the ability of these two super regulators to have stronger monitoring, supervisory and enforcement powers in proactively preventing, mitigating and anticipating any potential threats to the financial system as well as protecting financial customers. The underlying objectives of these regulatory reforms are aimed at avoiding another global financial crisis as propagated by the G20 countries. Australia is one of the first countries that has embraced and started to adopt the Twin Peaks model of financial reform. I have chosen to compare the Australian Prudential Authority with the envisaged Prudential Authority for South Africa. In undertaking such a comparative exercise I highlight some of the major differences in terms of how the regulatory authorities are structured in both countries and give an assessment on its impact in enhancing its financial regulatory dispensation. I also point out some of the similarities in each country’s reform process. I note the benefits (little impact on the global financial crisis) that the Australian Prudential Authority has brought to its financial system and conclude that such benefits could also materialise for South Africa’s dispensation if implemented effectively.
Finally I conclude with reasons why I think South Africa would benefit from adopting the Twin Peaks model of regulation in the form of the new Prudential Authority. In particular I am of the view that it would be in a much better position to proactively monitor, supervise, enforce and anticipate any systemic risks to its financial system thereby making it more resilient to any crisis. This reform is also intended to concentrate its efforts in protecting financial customers from unfair market conduct and treating them fairly.
LL.M.