South Africa’s financial regulatory system will fundamentally change as from April 1, when two new regulators come into operation – the Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA), the National Treasury said on Thursday.

This implements a new Twin Peaks model of financial sector regulation in South Africa, it noted.

Finance Minister Nhlanhla Nene and South African Reserve Bank (SARB) governor Lesetja Kganyago have appointed deputy SARB governor Kuben Naidoo as the CEO of the PA, which was established within the SARB to supervise the safety and soundness of all financial institutions.

Nene will also initiate the legislated process to appoint a commissioner and deputy commissioners for the FSCA, which is expected to take three months.

The FCSA will supervise how financial institutions conduct their business and treat customers. It will be responsible for improving customer protection in the financial sector, and driving better customer outcomes, as well as for the efficiency and integrity of financial markets.

The current Financial Services Board (FSB) will close down on March 31. A transitional management committee will be responsible for implementing the transitional plans, until an FSCA commissioner and deputies are appointed.

This Twin Peaks model of regulation was first proposed in 2011, with a policy document titled ‘A safer financial sector to service South Africa better’.

Twin Peaks is a comprehensive and complete system for regulating the financial sector, representing a decisive shift away form a fragmented regulatory approach. The model also reduces the possibility of regulatory arbitrage or forum shopping and close gaps in the regulatory system.

Twin Peaks aims to make the financial sector safer and more effectively operational in the interest of all South Africans, by reducing potential threats to financial stability. It also better protects customers by ensuring that financial institutions treat their customers fairly.

Both the PA and FSCA will publish regulatory strategies within six months of their establishment, setting out in further detail their intended regulatory focus areas and work plans over the next three years.