SA takes steps to improve financial regulatory structure

Godongwana said trust is fundamental to any financial system’s effectiveness and existence.

With the newly launched Corporation for Deposit Insurance (CODI), South Africa has taken a significant step in overhauling its financial regulatory structure, says Finance Minister Enoch Godongwana.

CODI is South Africa’s Deposit Insurance Scheme (DIS) created and mandated by law to protect qualifying bank depositors in the unlikely event of their bank failing.

READ | Deposit insurance body established to protect bank depositors

“The establishment of CODI underpins the consumer protection pillar, securing depositors by guaranteeing access to up to R100 000 of their deposits in case of a bank failure - an essential safety net in our rapidly evolving financial landscape and advancing the Twin Peaks model,” the Minister said on Thursday.

Addressing the CODI launch in Johannesburg, the Minister said the corporation will advance the Twin Peaks model.

“The Twin Peaks model revolutionises financial safety and consumer protection by splitting regulatory duties into two focused areas. One ensures financial institutions are robust and secure, and the other safeguards consumer interests.

"This model not only enhances the system's stability but also bolsters consumer confidence by offering clearer oversight and reducing financial crisis risks,” Godongwana said.

The Twin Peaks model positions two dedicated bodies - the Financial Sector Conduct Authority and the Prudential Authority - at the forefront, enhancing the management of complex financial systems and boosting both consumer and investor confidence.

The model was introduced by the National Treasury in 2011 as a response to vulnerabilities exposed by the global financial crisis.

“The Financial Sector Regulation Act of 2017 laid the legal foundation, establishing the Prudential Authority and the Financial Sector Conduct Authority in 2018. These bodies have since been fine-tuning regulations, adapting to new technologies, and enhancing their oversight capabilities.

“The Conduct of Financial Institutions (COFI) Bill, key to further solidifying this framework, has been refined through public consultations and is slated for parliamentary consideration later this year.

“Its focus on preventing bank failures from broadly impacting the financial system and economy is a testament to our proactive regulatory approach, preventing crises that have historically had devastating socioeconomic effects,” the Minister said.

Godongwana said trust is fundamental to any financial system’s effectiveness and existence.

“Yet, global trends, especially post-2008, show a marked decline in trust towards financial regulators, attributed to regulatory failures and perceived alignment with financial elites rather than the public. To counteract this, we must adopt a regulatory framework that is as dynamic and proactive as the financial sector itself.

“This involves not only adapting to but anticipating market changes, ensuring transparency, and enhancing public understanding and engagement in financial regulation. Regaining public trust in financial regulation requires deep structural reforms and a shift towards greater accountability, transparency, and public inclusivity,” the Minister said. 

(With Inputs from South African Government Press Release)