Financial Sector Supervision: Establishment of Prudential Authority in South Africa
Dive into the institutional arrangements for financial sector supervision in South Africa through the establishment of the Prudential Authority, as outlined by Dr. Janet Terblanch. Explore the transformation, governance structure, challenges, and scope of this regulatory framework.
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Presentation Transcript
Institutional arrangements for financial sector supervision Establishment of the Prudential Authority in South Africa Dr Janet Terblanch Head: Policy Division 4 March 2019
Overview 1. 2. 3. 4. 5. 6. 7. 8. 9. Before Twin Peaks Twin Peaks The Design Scope Transformation Governance structure Working with other regulators and the SARB The PA and the FSCA The PA and the SARB Experiences Regulatory strategy and supervisory framework Crucial co-operation and co-ordination with the other Twin 10. Challenges 2
1. Before Twin Peaks Friendly Societies \ Friendly Societies Friendly Societies Act Market Infrastructures Financial Markets Act Pensions Pension Funds Act Banks Banks Act Mutual Banks Act Co-operative Banks Act Exemption Notices CFIs Collective Investment Schemes Collective Investment Schemes Control Act Friendly Societies Act Insurers Long-term & Short-term Insurance Acts Fragmented legislation Regulatory arbitrage Different regulators with a prudential mandate Conduct regulation not uniformly applied 3
Twin Peaks The design The Financial Sector Regulation Act 9 of 2017 establishes the PA and the FSCA FSCA PA Objective Promotes safety and soundness of financial institutions Enhance and support the efficiency and integrity of markets Protect customers against risk Protect customers from unfair treatment, by providing financial education Assist in maintaining financial stability 4
Scope of the PA FMIs Banks Insurers CFIs 5
The PA transformation Develop New Competencies Effectiveness Efficiency Excellence CFI Insurance Supervision Supervision CFI Supervision Bank Bank Supervision Supervision Significant Owners Prudential Authority Prudential Authority Bank Supervision Insurance Supervision Conglomerates Supervision FMIs FMI Supervision Supervision Insurance Supervision CFI Supervision 6
PA governance structure Prudential Committee SARB Audit Committee SARB Risk Committee PA adopts the policies of the SARB where appropriate PA Management Committee Licensing Panel Designation Panel Sanctions and Enforcement Panel Restructuring and Expansions Panel Risk and Capital Panel Policy Panel 7
Working with other regulators and the SARB PA Micro- prudential Assist each other achieve objectives Share info Adopt consistent regulatory strategies FSRA SARB Macro- prudential FSCA Conduct Share databases Memorandum of Understanding Agree on attendance of international forums Develop appropriate consistent policy positions NCR, FIC Credit, AML Co-ordinate actions incl. regulatory instruments, licensing, etc. 8
Interactions between the PA and the FSCA 1. TWO-KEY LICENSING: - Approval of both regulators Satisfy prudential and conduct standards 2. REGULATORY INSTRUMENTS development of prudential & conduct standards drafting joint standards 3. FINANCIAL CONGLOMERATES designation of a financial conglomerate 4. SIGNIFICANT OWNERS concurrence when declaring that a person is not a significant owner 5. INSPECTION & INVESTIGATION share info relating to objectives 9
Interactions between the PA and the SARB 1. SYSTEMIC EVENTS SARB notifies PA of a systemic event Advises PA of steps taken PA assist SARB on restructuring, winding up, etc. of institutions 2. ROLE OF PA Provides SARB with info to manage systemic risks/events Consult SARB before exercising any powers that might compromise SARB s initiateves Works with SARB to maintain financial stability 3. SIFIs SARB consults PA when imposing prudential directives on SIFIs 10
Experiences Regulatory strategy and supervisory framework The Regulatory Strategy deals with the PA s approach to regulation and supervision, the areas of immediate focus as well as areas of additional priorities Approach to regulation Approach to supervision Supervisory frameworks Immediate focus areas Additional priorities 11
Experience Crucial co-operation and co-ordination with the other Twin Memorandum of understanding finalised in September 2018 Information sharing Consultation ICT requirements Working groups Concurrence Delegations 12
Challenges Forthcoming - FSAP - FSB Peer Review - FATF Mutual Evaluation Enhancing relationships with other regulators Reliance on primary legislation to be developed: Levies Bill New frameworks - Resolution Framework - Conduct of Financial Institutions (COFI) Act - Corporation for Deposit Insurance (CODI) Rapid developments: Int. standards Capacity and skills Aligning frameworks Time to understand new mandate and roles Full scope of PA medical schemes, CIS, Pension funds 13
Discussion 14
