• University of New South Wales
  • Macquarie University
  • The University of Sydney
  • University of Technology Sydney
  • Australian National University
  • The University of Melbourne
  • Capital Markets
  • Sirca
  • Commonwealth Bank
  • KPMG
  • King & Wood Mallesons
  • Macquarie
  • Australian Government - Treasury
  • New South Wales Goverment

CIFR Research Project

Financial System Regulation- is Australia's "Twin Peaks" Approach a Model for China? - E018
Assessment Round: April 2013  Completion Date: 2016
Project Summary

The Global Financial Crisis and its fallout have tested the integrity and resilience of regulatory frameworks in respect of financial services. The relevance of the ‘twin peaks’ model for financial regulation, as pioneered in Australia, is becoming greater as an increasing number of jurisdictions have adopted, or are considering adopting, this model. Australia operates a functionally-based twin peaks model under which regulatory responsibility is divided primarily between two regulators. The Australian Securities and Investments Commission (ASIC) is responsible for the regulation of companies, market conduct and consumer protection. The Australian Prudential Regulation Authority (APRA) is responsible for prudential regulation.

Project Objective
The research aimed to examine the legal and regulatory pre-conditions that are necessary for the ‘twin peaks’ model to be implemented, and the key challenges relating to the adoption of this model in emerging markets such as China.

Project Outcome

The paper, Twin Peaks- the Legal and Regulatory Anatomy of Australia’s System of Financial Regulation, examined the legislative and regulatory anatomy of the twin peaks model in Australia and identified two critically important features:

  • Clarity of responsibilities and objectives of each regulator and;

  • A framework of coordination in which regulators share information proactively, and cooperate in the performance of their supervisory and enforcement functions.

When compared with other twin peaks jurisdictions, the Australian regulatory coordination system is distinct in that it relies more on soft law than prescriptive legislation. It is primarily informal, voluntary and cooperative in nature. This is underpinned by a culture where mutual trust exists between the regulators, who have a collective interest in ensuring that the system works and in allowing each other to perform their roles effectively.

There is no archetypal twin peaks model. The variations in the

regulatory design of the model reveal that it is inherently flexible, and can and should be modified to suit local conditions and the local regulatory culture. If China were to move towards a twin peaks model, it would need to consider fundamental questions as to which version of the model would be appropriate. These questions include: where the prudential regulators should be housed; how the functions and objectives of the regulators should be expressed; and how effective regulatory coordination should be achieved.

The South African Government, which proposes to adopt the model, has sought submissions from the researchers in this project. Of 25 specific recommendations made by the authors, 22 have been incorporated into the draft South African legislation. The approach from South Africa’s legislators shows that Australia’s regulatory regime is highly regarded internationally, and that Australian academics are recognised on the world stage.



CIFR Team from Melbourne Law School (MLS) Provides Input on Financial Sector Legislative Reform in South Africa


On 27 October 2015, the South African Minister of Finance tabled the Financial Sector Regulation Bill (FSR Bill) in Parliament. When enacted, the FSR Bill will introduce a Twin Peaks model of financial sector regulation in South Africa, along similar lines to the model as it was first adopted in Australia in 1998.


The FSR Bill incorporates public comments received on the second draft, which was published in December 2014. Included in the submissions made to the National Treasury was a submission by MLS as part of a CIFR-funded research project, led by Andrew Godwin and Professor Ian Ramsay, which examines Australia’s experience with the twin peaks model and the extent to which it serves as a model for reform in China.


The adoption of the twin peaks model in South Africa will result in the creation of two regulators: a market conduct regulator called the ‘Financial Sector Conduct Authority’ and a new prudential regulator called the ‘Prudential Authority’. The South African Reserve Bank (SARB) will continue to play an important role in overseeing financial stability, ‘within a policy framework agreed with the Minister of Finance.’[1] The model will see the SARB responsible for macroprudential supervision, while the Prudential Authority will be tasked with microprudential supervision.


As noted in the detailed comments matrix published along with the FSR Bill,[2] the National Treasury accepted many of the recommendations by MLS in its submission, including recommendations in respect of the coordination arrangements between the new regulators. It is expected that the Bill will be enacted in 2016.

[1] Republic of South Africa National Treasury, ‘Twin Peaks in South Africa: Response and Explanatory Document’ (Accompanying the second draft of the Financial Sector Regulation Bill, December 2014) 6-7. 

[2] For the detailed comments matrix, see Treasury document.


The research has been presented at:

CIFR SYMPOSIUM: Market and Regulatory Performance
Sydney (July 2014)



Team Leader:
Mr Andrew Godwin | Senior Law Lecturer, Melbourne Law School, University of Melbourne
Professor Guo Li | Professor, Peking University Law School, Peking University
Professor Ian Ramsay | Harold Ford Professor of Commercial Law, Director of the Centre for Corporate Law and Securities Regulation, Melbourne Law School, University of Melbourne
Project Outputs:


The Centre for International Finance and Regulation (CIFR) represents a strategic link between academia, financial regulators, policy makers and industry, promoting financial sector vibrancy, resiliency and integrity, through leading research and education.

CIFR receives funding and support from the Commonwealth and NSW Governments, and its industry, university and research centre partners.



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