The Global Financial Crisis and its fallout have tested the integrity and resilience of regulatory frameworks in respect of financial services and have led to significant reforms to those frameworks around the world. As financial institutions and the financial markets in China become more integrated and sophisticated, it is likely that China will need to re-consider its approach to financial regulation and review developments in other markets. Inevitably, its attention will turn to the models and reforms introduced in markets such as the United Kingdom and the United States. In this research project, we propose to consider the extent to which Australia's "twin peaks" approach to financial services regulation provides a model for reform in China. Although the focus is on China, it is expected that the findings will also be relevant to other emerging markets in Asia.
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.’ 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, 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.
 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.