1. Institutional arrangements for financial sector supervision Establishment of the Prudential Authority in South Africa
Dr Janet Terblanché
Head: Policy Division
4 March 2019

2. Overview 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
Challenges

3. 1. Before Twin Peaks Fragmented legislation Regulatory arbitrage
Market Infrastructures
Financial Markets Act \
Banks
Banks Act
Mutual Banks Act
Co-operative
Exemption Notices
CFIs
Insurers
Long-term & Short-term Insurance Acts
Pensions
Pension Funds Act
Collective Investment Schemes
Collective Investment Schemes Control Act
Friendly Societies
Friendly Societies Act
Friendly Societies
Friendly Societies Act
Fragmented legislation
Regulatory arbitrage
Different regulators with a prudential mandate
Conduct regulation not uniformly applied

4. Assist in maintaining financial stability
Twin Peaks – The design
The Financial Sector Regulation Act 9 of 2017 establishes the PA and the FSCA
FSCA PA
Objective
Enhance and support the efficiency and integrity of markets
Protect customers from unfair treatment, by providing financial education
Promotes safety and soundness of financial institutions
Protect customers against risk
Assist in maintaining financial stability

5. Scope of the PA
FMIs
Banks
Insurers
CFIs

6. The PA transformation Prudential Authority Prudential Authority
CFI Supervision
Bank Supervision
Insurance Supervision
FMI Supervision
CFI
Supervision
Bank Supervision
Insurance Supervision
FMIs
Conglomerates
Significant Owners
Effectiveness
Efficiency
Excellence
Develop New Competencies
Insurance Supervision
Prudential Authority
Bank Supervision
CFI Supervision

7. PA governance structure
Prudential Committee
SARB Risk Committee
SARB Audit Committee
PA adopts the policies of the SARB where appropriate
PA Management Committee
Licensing Panel
Designation Panel
Sanctions and Enforcement Panel
Policy Panel
Restructuring and Expansions Panel
Risk and Capital Panel

8. Working with other regulators and the SARB
FSRA
Memorandum of Understanding PA
Micro-prudential
FSCA
Conduct
NCR, FIC Credit, AML
SARB
Macro-prudential
Assist each other achieve objectives
Share info
Adopt consistent regulatory strategies
Share databases
Agree on attendance of international forums
Develop appropriate consistent policy positions
Co-ordinate actions incl. regulatory instruments, licensing, etc.

9. Interactions between the PA and the FSCA
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

10. Interactions between the PA and the SARB
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

11. 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

12. 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

13. Challenges Forthcoming Enhancing relationships with other regulators
- 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

14. Discussion