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Financial Stability Board Says South Africa Plan Boosts System

South Africa, which has five bodies overseeing its financial markets, will boost the system’s stability and resilience by introducing the so-called twin-peaks model of regulation, the Financial Stability Board said.

Pravin Gordhan, South Africa’s finance minister, issued a policy document on twin peaks regulation in 2011. A twin-peaks system refers to splitting rule-making and enforcement duties into separate divisions. Dividing prudential oversight from market conduct is necessary to protect banks from pursuing risky short-term behavior, Gordhan said last year.

“The shift to a twin-peaks model provides a good opportunity for South Africa to streamline responsibilities and elevate the importance of market conduct regulation,” the Basel-based organization said. “The twin-peaks model will also help to improve oversight of financial conglomerates,” it said.

The Financial Stability Board suggested South Africa incorporate its national credit regulator in its new structures and shift legal authority for the regulation of public companies’ disclosure to the Financial Services Board from the Department of Trade and Industry. It also suggested establishing a Council of Financial Regulators with broad membership; and give the Financial Services Board the ability to levy fines in the over-the-counter derivatives market.

“There is scope for additional cooperation between the South African Reserve Bank and the Financial Services Board with the National Credit Regulator,” the Financial Stability Board said in a statement. While the country’s regulation of over-the-counter derivatives markets has also shown progress, “many details of the reforms are not yet resolved,” the board said.

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