The Reserve Bank’s Prudential Authority, which will play a role in the regulation of the financial sector, will come into effect on 1 April.
“The Prudential Authority (PA) will be a juristic person operating within the administration of the South African Reserve Bank. This month (March) sees the final planning stages for the establishment of the PA,” said the central bank on Thursday.
The PA will be responsible for regulating banks, insurers, cooperative financial institutions, financial conglomerates and certain market infrastructures.
The authority will consist of four departments, namely Financial Conglomerate Supervision Department; Banking, Insurance and Financial Market Infrastructure Supervision Department; Risk Support Department; and Policy and the Statistics and Industry Support Department.
The dedicated PA website, www.prudentialauthority.co.za, will go live on 1 April 2018, with the full PA team on hand to ensure the effective regulation of South Africa’s financial sector.
The Reserve Bank said the Twin Peaks model for financial sector regulation was proposed as a means to reform the regulatory and supervisory system insofar as it relates to financial institutions.
In June 2011, Cabinet approved the move towards the model, which resulted in the drafting of the Financial Sector Regulation (FSR) Act, which was signed into law on 21 August 2017.
The FSR Act gives effect to three important changes to the regulation of South Africa’s financial sector. First, it gives the Reserve Bank an explicit mandate to maintain and enhance financial stability.
Second, it creates a prudential regulator, which is known as the PA, located within the central bank. The FSR Act establishes what is called a market conduct regulator, which will be located outside of the Reserve Bank.
The passing of the FSR Act is the culmination of collaboration on financial sector reform by the Reserve Bank, National Treasury and the Financial Services Board over the past decade. It marks an important milestone on the journey towards a safer and fairer financial system that is able to serve all citizens.