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Cost implications of Twin Peaks

Some of the harshest criticism of the Financial Sector Regulation Act concerns cost, with some claiming inadequate impact assessment, specifically as far as cost is concerned.

Caroline Da Silva,acting Deputy Executive Officer for Insurance at the FSB, noted the following in the latest Twin Peaks newsletter:

While implementing the Twin Peaks model will have cost implications, Da Silva believes that from a market conduct perspective these costs will be appropriate compared to the size of the financial sector’s assets and revenues.

The extension of the jurisdiction of the FSCA to all financial institutions including banking, and aspects of the conduct of certain credit providers, means that these institutions will pick up the appropriate portion of these additional costs where resourcing is required to enable their supervision.

Over and above the extension of jurisdiction, the proactive, risk-based and outcomes-focused approach to regulation and supervision under Twin Peaks will require some different skills at the FSCA which implies additional costs. These include strong research skills, data analytic capability, Fintech capability and the use of Fintech to supervise and regulate just as a few examples.

These initial costs however should be justified over time by greater efficiencies and embedment of appropriate risk based supervision, which for many will result in an alleviation of costs but not responsibility.

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