The twin peaks model: a critical analysis of its effectiveness in South Africa

Abstract

The Global Financial Crises of 2008, revealed many gaps in the regulatory structures of some of the leading countries in the world. This study is designed to assess the effectiveness of the Twin Peaks Regulatory model, in order to address South Africa’s need for regulatory reform. Research papers, journal articles, reports, conference documents, policy documents and other secondary data resources were reviewed, analysed and critiqued to gain an understanding of the model and how it is likely to suit South Africa, as a developing country. The Twin Peaks Model has been adopted and effectively implemented by international counterparts over the past 20 years. Australia was the first to implement it successfully, followed by the Netherlands, New Zealand, Belgium and The United Kingdom. These countries adopted and adapted the Twin Peaks Model to fit their financial regulatory reform needs. Focussing on these countries, it is shown that the Twin Peaks Model was variously adjusted by each country to suit their specific regulatory requirements. South Africa will therefore also have to adapt the model to their identified needs. Based on the above findings, this research recommends that South Africa reforms their current financial regulatory model and adapt it to incorporate the Twin Peaks Model. This can be done by incorporating the National Credit Regulator along with the Prudential Authority and Financial Sector Conduct Authority. Furthermore, comparatively this study shows that there are many adaptations to the Twin Peaks Model’s architectural structure and there is no one fixed conventional model. This reality allows for flexibility around the structural design, operational independence and regulatory coordination. Key Words: Central Bank, Global Financial Crises, Market Conduct Regulator, Prudential Authority, The Twin Peaks Model