Finance Minister Nhlanhla Nene has set in motion processes to disband the Financial Services Board (FSB) as well as unbundle the banking supervision department from the Reserve Bank.
The FSB will be replaced by a new body called the Financial Sector Conduct Authority (FSCA), while the banking supervision department will be located within a new regulator called the Prudential Authority (PA).
Dubbed the ‘Twin Peaks regulatory system’, the model was approved by Cabinet in 2011, and it aims “to create a safer financial sector that works effectively in the interests of all South Africans, by reducing potential threats to the financial system and providing better protection to financial customers”.
In a statement released by Treasury, it was announced that the FSCA, the FSB’s replacement, will “supervise how financial institutions conduct their business and treat customers”.
The new body is also tasked with “improving customer protection in the financial sector, and driving better customer outcomes, ensuring that the sector serves South Africans best”.
The Prudential Authority (PA), a new entity linked to the Reserve Bank, “will be responsible for the safety and soundness of banks, insurers and other financial institutions”. The transition period will affect entities currently reporting to the FSB, such the office of the Financial Services (Fais) ombudsman.
Over the weekend, National Treasury released job adverts for the commissioner and deputy commissioner of the FSCA, while the deputy governor of the Reserve Bank will be in charge of the PA. Addressing FSCA staff members last week, Nene assured them the transition would be painless and that the FSB board chairperson was currently the chairperson of a transitional management committee to oversee FSB to FSCA.
In terms of the transition period, the FSCA will inherit existing investigations and inspections carried over from the FSB period and matters being heard by the FSB enforcement committee and appeals board will be seen to conclusion.
The current members of the FSB appeal board, the board of review and the FIC appeal board will be appointed to constitute the Financial Services Tribunal for a period of three years to be chaired by retired Constitutional Court Justice Yvonne Mokgoro.
An ombudsman council is to be created in terms of the FSR Act, effective from October 1, to allow for sufficient time for appointments to be made. The council will oversee all the ombudsman offices reporting to the FSB.
“The FSR Act does not affect the composition and establishment of the statutory ombuds. One change is that the ombuds had previously reported to the FSB Board as their oversight body. As this board no longer exists the independent governance committees established to perform over of the Financial Sector Conduct Authority will similarly perform oversight over the statutory ombuds,” Treasury said in an emailed statement.