Industry stakeholders recently attended a two-day workshop on the implementation of the Twin Peaks model of financial regulation, which will see the FSB become a dedicated market conduct regulator with an enhanced mandate for the supervision of conduct of business, market integrity and consumer education. The purpose of the workshop was to obtain the input of key stakeholders and role players in the industry on the FSB’s new regulatory and supervisory strategy.
The following information was extracted from a media release on the workshop:
Jonathan Dixon, Deputy Officer: Insurance at the FSB, noted that some of the challenges of the existing system are that it has tended to be too compliance-based and reactive, often only responding to complaints, rather than addressing risks before they result in poor customer outcomes. “There is a problem when a system is purely rules-based, as both companies and the regulator are then overly focused on ticking the right boxes rather than identifying what the real underlying issues may be. The bottom line is that the industry and the regulator need to become more forward-looking and pre-empt problems before the fact, to better enhance fairness, integrity and efficiency in the financial system.” Katherine Gibson, from the financial sector policy unit at National Treasury, noted that the reform is primarily focused on changing culture, not simply changing the rules. “Establishing new regulators is not about rearranging existing responsibilities; it is a complete change in focus. Twin Peaks is about developing a more proactive, pre-emptive and forward-looking approach to regulation as well as a common system that harmonises powers and toolkits that are available.”
As part of the two-day industry consultation, it was highlighted that effective financial regulation can help support growth and development of the financial sector. The new regulatory body needs to work together with the industry to help them adapt to changing legislation and achieve regulatory objectives, but also needs the necessary “teeth” to enforce the regulatory framework proactively and effectively. A further point that was emphasised was the fact that both the industry and the regulator are moving towards a more consumer-centric focus, with recognition that the empowerment and financial education of consumers is an important part of these developments.
Leanne Jackson, Head of Market Conduct Strategy at the FSB, noted that the regulator is aware that a degree of up-skilling will be required as part of the market conduct authority’s enhanced mandate, including a deep understanding of the business models of various industry players and how they distribute their products. “This new model will also include a consolidated approach to the development of the market conduct regulatory framework, ensuring that new regulatory projects are looked at holistically, rather than via a silo approach to ensure a greater harmonisation of the current framework and avoid duplication or contradiction in legislation,” said Jackson.