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Invitation for public comments on the draft Financial Sector Regulation Bill, 2013

The National Treasury invites public comments on the draft Financial Sector Regulation Bill, 2013.
The draft bill is the first in a series of Bills that gives effect to Cabinet’s decision to implement a “twin-peaks” model of financial regulation to make the financial sector safer and serve South Africa better. The Bill follows two policy papers that respond to lessons learnt in the 2008 global financial crisis: A Safer Financial Sector to Serve South Africa Better released with the 2011 Budget, and a Roadmap for Implementing Twin Peaks Reforms, released on 1 February 2013 (available on the treasury website).

The twin peaks regulatory framework will provide a comprehensive framework for regulating the financial sector.

The implementation of Twin Peaks reform is a multi-year project, with a two-phase process envisaged (see below). This Bill covers the first phase, which is to establish the following two regulatory authorities:

• A new Prudential Authority within the Reserve Bank. This Authority will be responsible for the oversight of the safety and soundness of banks, insurers and financial conglomerates.
• A new Market Conduct Authority to protect customers of financial services firms, and to improve the way financial service providers conduct their business. This Authority will also be responsible for ensuring the integrity and efficiency of financial markets, and promoting effective financial consumer education. As noted below, Phase 2 of the process will streamline the framework for market conduct legislation.

In addition, the Bill gives the South African Reserve Bank primary responsibility to oversee financial stability. To facilitate this, the Bill creates a statutory inter-agency Financial Stability Oversight Committee (FSOC), chaired by the Governor of the Reserve Bank, with appropriate financial stability powers.

The phased approach to the implementation of Twin Peaks reform

As set out above, in the first phase of the reform, the two regulators will be established and appropriate powers assigned to them. In phase one, very few changes will made to existing sector legislation (e.g. the Banks Act), other than re-assigning responsibility for implementation of legislation to the two regulators (e.g. the formal responsibility for the Banks Act is shifted from the Banking Supervision Department to the Prudential Authority). This will substantially minimise disruption during the transition phase.|

The draft Financial Sector Regulation Bill also creates the concepts of “mono-regulated” and “dual regulated” institutions. Mono-regulated entities are those that undertake activities that only give rise to market conduct regulation (e.g. advisory and intermediary services). Dual-regulated entities are those that undertake activities that give rise to both prudential and market conduct regulation (e.g. banking and insurance). Table 1 provides more detail.

Please download complete document attached above, with table.