COMMISSIONS OF INQUIRY
In 1987, the De Kock Commission observed that institutional
regulation had resulted in over-regulation in the banking
sector, making the sector inefficient and not competitive,
and recommended functional regulation (regulating specific
activities) and risk-weighted equity rules.
In 1993, the Melamet Commission recommended that South
Africa adopt a unified regulatory approach to be in line with
developments in European countries whose financial systems
are similar.
SOUTH AFRICAN NATIONAL POLICY DOCUMENTS
South Africa, which incidentally was contemplating adopting
a single regulator model from the recommendation from
the 1993 Melamet Commission, decided to move in line with
international trends.
In 2011, it issued a policy document announcing reforms
to improve the institutional structures to support financial
regulation. This document proposed a shift, which the South
African Cabinet adopted in July 2011, to a twin peaks model of
financial sector regulation.
Given its current regulatory structure, the adoption of the
twin-peaks model was considered to cause the least amount
of disruption to both market participants and the current
regulators.
This was followed by the publication of “Implementing a
twin-peaks model of financial regulation in South Africa” on 1
February 2013. The policy document contains detailed proposals
on the implementation of the twin peaks model.
The shift to the twin peaks system of financial regulation
will result in the Financial Services Board being responsible for
market conduct, whilst the South African Reserve Bank will be
responsible for prudential regulation. An interagency financial
stability oversight committee will also be formed, as well as a
council of financial regulators.
It seems that, given South Africa’s historical neglect of
market conduct regulation, the twin peaks model is probably
the optimal means of giving sufficient priority to transparency,
market integrity, and consumer protection.
The policy document expresses concern that the fragmented
nature of the current ombud system poses certain risks.
These risks include, inter alia, consumer confusion, gaps
and overlaps in jurisdiction, administrative inefficiencies,
inconsistencies in approach, and doubts regarding the
independence of the industry – sponsored voluntary schemes.
A review of the current ombud system is underway in South
Africa to develop recommendations to improve its efficiency
and effectiveness, while building on the work and expertise of
existing bodies.
As part of this review process, options that are being
considered for the financial ombud system structure include:
Given its current regulatory
structure, the adoption of
the twin-peaks model was
considered to cause the
least amount of disruption
to both market participants
and the current regulators.
• Continuing the current system of independent offices, but
with stronger oversight by the Financial Services Ombud
Schemes Council.
• Establishing a merged entity with a single representative
governing body under the leadership of an executive officer,
while retaining separate ombuds for each sector. In this
model, the sectoral ombuds would be tasked with dispute
resolution and issuing determinations, while governance and
operational matters would be centrally co-ordinated. Regional
ombud offices could be built into such a model.
The policy document (February 2013) appears to concede that
the voluntary ombuds system is best suited to provide customers
with access to simple, effective and independent resolution
mechanisms that can secure them a fair outcome when broader
consumer protection frameworks fail.
The existence, too, of the voluntary ombud scheme does not
appear to be under threat, and will continue to exist whether
in the current form of independent offices, but with stronger
oversight, or in a merged entity with possible regional offices.
Edition 8
Expert Opinion.indd 25
BANKER SA
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2013/12/20 9:08 AM