The Competition Commission recently referred three South African banks and several foreign-owned banks to the Competition Tribunal because of their alleged involvement in price-fixing.
These banks are accused by the Competition Commission of manipulating the price of the Rand when selling and buying Dollars. Price-fixing was conducted by creating fictitious orders to buy and sell South African Rand (ZAR), thereby changing the supply of currency. There was also alleged collusion between banks to co-ordinate the times for selling currency, as well as the manipulation of prices by periodically suspending the sale of ZAR.
Not only does this scandal put good corporate citizenship in the spotlight, but it also highlights the need for more effective regulation in the Financial Sector. It is hoped that the long-awaited Financial Sector Regulation Bill (also known as the Twin Peaks Bill) will introduce a new era of market conduct regulation for retail banks, thereby enabling the forthcoming market conduct regulator to impose stricter standards on banks in the same way it does with insurers.
The Twin Peaks Bill is currently before the National Council of Provinces (NCOP) in Parliament, and has already been passed by the National Assembly. It is expected to come into effect towards the middle of this year.
The Twin Peaks model of financial sector regulation recommends the creation of a prudential regulator, the Prudential Authority, to be housed in the South African Reserve Bank (SARB), while the Financial Services Board (FSB) will be transformed into a dedicated market conduct regulator, the Financial Sector Conduct Authority.
The implementation of the Twin Peaks model in South Africa has two fundamental objectives:
South Africa’s financial sector regulatory reform process is already well-underway and the Twin Peaks system will make the financial sector safer. It is hoped that the new regulations will bring about better outcomes for consumers, the financial sector and the wider economy, by ensuring that customers are treated fairly and that their funds are better protected.