The role of regulation in Financial Services

The Financial Services Conduct Authority (FSCA) took over from the Financial Services Board (FSB) in 2018 and regulates Banking, Insurance, Investments, Pensions and Financial Advisors, and a few other sectors.

The National Credit Regulator (NCR) regulates debt counsellors, credit bureaus, Payment Distribution Agents and banks, to name a few.

Some have heard about the role of the Twin Peaks model, adopted by South Africa, which aims to enhance the stability, transparency, and integrity of the financial system by dividing regulatory responsibilities into two distinct but complementary peaks: the Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA). The Twin Peaks model has proven effective in other countries like Australia and the Netherlands. In an over-simplistic explanation of one of the pillars of the Twin Peaks model, it isn’t merely acceptable to have ticked all the boxes to ensure consumer protection, but it is imperative to have done everything possible to achieve a positive outcome. Whether it be about obtaining a court order or ensuring the acceptance of a proposal, at an interest rate that doesn’t put the consumer in a worse position, the focus is on outcomes-based results.

The PA, operating under the South African Reserve Bank, is responsible for overseeing the prudential regulation of financial institutions. Its primary focus is on maintaining the safety and soundness of financial entities to ensure systemic stability by concentrating on the health of banks, insurers, and other financial firms. The PA works to prevent the types of collapses that could have widespread economic repercussions, like the financial crisis of 2008 and the collapse of Lehman Brothers at the time of subprime lending. It is common knowledge that the South African Banking system showed exceptional stability during this time.

In an online article by Edward Nathan Sonnenbergs in March 2024, they summarise the functions and focus of the New Financial Ombudsman (NFO), which officially begins on 1 September 2024. It could be a valuable tool for the Debt Counselling Industry, because it has jurisdiction over Banks, Credit Providers and Insurers (Non-Life and Life Insurance).

Debt Counselling market participants might have noticed the industry’s improvements as it matured. Undoubtedly, the lifecycle of consumers under the process has improved, increasing the most valuable income stream for debt counsellors. All parties have improved timeframes in obtaining court orders and adhering to timelines and Task Team agreements.

In a beautiful example of capitalism working with regulation to improve the end-product for the consumer, clients now reap the benefits of a better (or more effective) industry. It might well be the win-win-win for banks, debt counsellors and consumers we’ve strived towards.

With this amount of focus on consumer protection, it is as hard to imagine an informal debt rearrangement industry as it is to imagine an unregulated investment industry. – Eugene Cilliers NCRDC1636  ( @ Payplan Solutions )