Melbourne academics advise South African government on financial sector regulation

February 15 / 152

Dr Andrew Godwin and Dr Andy Schmulow
Dr Andrew Godwin and Dr Andy Schmulow

The South African government has accepted recommendations made by Melbourne academics Andrew Godwin and Dr Andy Schmulow, in moves to bring significant reform to the country’s financial system regulation.

In a desire to emulate Australia’s remarkable performance during the global financial crisis, South Africa is moving to adopt the Twin Peaks system of financial regulation. Australia was the first country to adopt Twin Peaks – named, tongue-in-cheek, for the 1980s David Lynch/Mark Frost TV series.
 
The Twin Peaks system uses two equally powerful regulating bodies, one overseeing consumer protection and market conduct, and the other overseeing system stability.
 
“But Twin Peaks,” said Dr Schmulow, “to borrow from Winston Churchill, is not the beginning of the end. It is merely the end of the beginning.” And while Twin Peaks was part of the reason Australia survived the GFC unscathed, it is not a fool-proof system. Fine-tuning legislation so that the system can be optimised is essential.

Godwin and Schmulow went through South Africa’s Financial Sector Regulation Bill with a fine-tooth comb, making 25 substantial and far-reaching recommendations, of which the South African National Treasury has accepted 22.  The bill represents the most significant reform to South Africa’s financial sector regulation since South Africa left the Gold Standard in 1932.

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