A critical examination of the regulation of the financial services sector in South Africa.

Master of Law in Business Law. University of KwaZulu-Natal, Howard College 2014.The financial system of a country has a crucial role to play in economic growth. The system, efficiently directs savings of lenders to ultimate borrowers. It also provides an efficient payment system through the banking institutions. Every country seeks to have effective laws regulating its financial system to ensure the efficiency and effectiveness of such system. However, the global financial crisis in 2008 revealed that the soft regulation approach adopted by most countries was not effective and that tougher regulation was needed. This led many countries to reform their system of financial regulation and to adopt a macro-prudential regulation approach. The macro-prudential approach deals with the financial stability and soundness of the financial system as a whole and not the individual financial institutions in isolation. South Africa is no exception. Although South Africa, compared with many other developed countries, was protected from the repercussions of the crisis, it introduced a number of financial regulatory reforms. Following the trend in the United Kingdom, South Africa has indicated an intention to adopt a twin-peaks model of financial regulation to make the financial sector of the country safer and to serve the country better. This dissertation seeks to consider the impact of the twin-peaks model of financial regulation on the financial sector in South Africa. It is intended that the model will provide protection for consumers of financial services on issues which are not covered by the Consumer Protection Act, 2008. The model will dispense with the need for a multiplicity of regulators. This will ensure that there is proper control over market conduct, and will prevent unscrupulous persons from jumping from one regulator to another to avoid detection. It is suggested that it would be better for South Africa, to introduce a regulatory system that suits its own problems and environment instead of adopting systems adopted by other countries. However, it is acknowledged that this may take a couple of years to be conceived, prepared and implemented, which could result in consumers and investors being prejudiced by unscrupulous advisors. It is concluded therefore that the twin-peaks model may have some flaws and may be cumbersome for South Africa, but it is an immediate solution, and it can be optimised to accommodate South Africa‟s specific needs as time goes by. It is also suggested that the model should embrace the National Credit Regulator in order to provide an efficient control of the credit industry, and to ensure that an Africa Bank type saga does not re-occur