What is “twin peaks”?

Twin peaks is the new approach of National Treasury through which one body would be responsible for prudential oversight of the financial sector, and a separate body would regulate market conduct in the sector. The  process is still unfolding, but there is a fairly clear picture of what the twin peaks approach will mean.

Minister of Finance, Nhlanhla Nene

In practice, the South African Reserve Bank (Sarb) will house a prudential authority that will not just regulate banks as it currently does, but will instead oversee the safety and soundness of all financial institutions. At the same time, the Financial Services Board (FSB) will become the new ‘financial sector conduct authority’, concerned specifically with how financial institutions conduct themselves and treat their customers. The market conduct authority will also have a specific obligation to monitor the sector for emerging risks and trends, and decide whether these should be brought into its net.

In the current landscape, these responsibilities are shared in different combinations between different regulators. Twin peaks allocates them more clearly to dedicated authorities. While the merits or otherwise of a twin peaks approach can be debated, what South African consumers will really want to know is whether it will mean that the market conduct authority will be able to fulfil its mandate with more vigour than the FSB has done. There is a general feeling that the regulator has not shown an ability to act swiftly or effectively enough in cases where consumers have ultimately lost a great deal of money.

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