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Everything consumers need to know about the new financial regulators

Cape Town – The Twin Peaks model for financial regulation came into force on April 1 with the aim of creating a safer financial sector which protects consumers and reduces threats to the financial system.

As a result the Financial Services Board (FSB) has been replaced by the Financial Services Conduct Authority (FSCA) and a new Prudential Authority has been established.

Finance Minister Nhlanhla Nene launched these authorities this week, in line with the Financial Sector Regulation Act for 2017.

At the launch, Nene said that Twin Peaks is a “dynamic, innovative and smart system”. “It aims to streamline our approach to financial regulation, to clearly define roles and responsibilities, and to create flexibility.

“It creates a dedicated Prudential Authority to look after safety and soundness, and a dedicated conduct authority to look after the way financial institutions treat their customers.”

What does the FSCA do?

The objectives of the FSCA were outlined in a statement issued on Thursday.

The organisation explained its objectives are to protect financial customers by promoting fair treatment by financial institutions, providing financial education programs, and promoting financial literacy.

The FSCA will also support the efficiency and integrity of financial markets. It will assist in maintaining financial stability and support financial inclusion and transformation of the financial sector.

“It will be responsible for significantly improving customer protection in the financial sector, and driving better customer outcomes, ensuring that the sector serves South Africans best,” Treasury said in a separate statement issued on Friday.

Gradually changes will be introduced over the year, the FSCA stated.

Immediate changes however include the establishment of a Financial Sector Tribunal, for those aggrieved by an FSCA decision to approach. This tribunal will replace the former FSB Appeal Board.

The FSCA indicated that dealings with financial institutions will continue to be “business as usual”.

Who is heading the FSCA?

A commissioner and deputy commissioners will be appointed to serve as the executive committee. The process to appoint the commissioners will start to and has been set out in regulations by the finance minister.

A Transitional Management Committee will manage the FSCA until the commissioner is appointed. This committee will include members from the former FSB executive committee, the chairperson of the former FSB board Abel Sithole and National Treasury’s Katherine Gibson. Sithole will act as commissioner until the new commissioner is appointed, the FSCA stated.

The committee has already started working and they will continue to serve in an advisory capacity for three months after the commissioner is appointed.

The organisation will be introducing steps to align to its new mandate by also introducing changes to its structure. This involves up-skilling of current staff and recruiting new skills and expertise to address the mandate.

The FSCA will publish its regulatory strategy by no later than September 2018, with a focus on financial inclusion and Fintech, among other things. The organisation will also publish over the course of the year memoranda of understanding between other organisations it will be working with like the SA Reserve Bank, the Prudential Authority and the National Credit Regulator.

Prudential Authority

The Prudential Authority will be a new entity within the Reserve Bank and will replace the Banking Supervision Department, Treasury stated.

The Prudential Authority is responsible for the safety and soundness of banks, insurers, and other financial institutions.

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