building
a new
organisation
The architecture and implementation of the Twin Peaks model of regulation is a significant milestone for the South African financial services sector, representing a paradigm shift that seeks to enhance the efficiency and integrity of financial markets, promote the fair treatment of customers by financial institutions, provide financial education and promote financial literacy, and assist in maintaining financial stability.
As a newly established conduct authority, the FSCA has new objectives which fall within the mandate and scope set by the Financial Sector Regulation (FSR) Act. This necessitates that the new organisation be fully capacitated in both infrastructure and skills to optimally support its extended scope and new approach. According to FSCA Commissioner Mr Abel Sithole, the widened jurisdiction of the FSCA means that it now has in its regulatory ambit, oversight over retail banks and credit providers, and its new approach tasks it to more pro- actively protect financial customers to ensure that they are fairly treated.
To this end, the FSCA has undertaken an organisational redesign and capacity building programme in order to ensure a smooth transition from the FSB to the new regulatory environment. The broadened scope brings a large number of additional entities into the regulatory net of the FSCA. Mr Jabulane Hlalethoa, FSCA divisional executive for the corporate center, is of the view that supervision resources and capabilities will need to be expanded to accommodate this increase in the number of entities and the new areas of oversight. The organisation has already identified these areas and although it has begun the process of recruiting for these skills, the skills required to regulate the new entities are likely to require the FSCA to recruit externally.
The FSCA was created by the Financial Sector Regulation Act, 9 of 2017 (the FSR Act), which – in summary1 – sets the objective for the FSCA to:
• enhance the efficiency and integrity of financial markets
• promote fair customer treatment by financial institutions
• provide financial education and promote financial literacy, and
• assist in maintaining financial stability.
The shift in approach to pro-active and intrusive supervision makes access to information, stakeholder engagement and data a priority. As such, the leadership of the FSCA is committed to regular consultation with stakeholders in line with the consultation requirements set out in the FSR Act and . is establishing a business hub for the submission of statutory returns to enable ease of doing business with the supervisor. Over and above this the FSCA is establishing a data divisin to support the regulators shift to a data driven digital strategy since pro- active supervision is not possible without effective use of data and effective data analystics. Research will also continue to be critical in the deployment of this new regulatory mandate, including consumer data, trend analysis, industry developments, or other critical insights. “Our intention is to ensure that research teams are adequately resourced in building efficiency for the new functions as well as the expansion of the scope to include new entities,” says Hlalethoa. The development of fintech in the sector provides opportunities to improve access and inclusion of customers. As a new area of focus for the FSCA, the regulator is taking all the necessary steps to keep abreast of developments.
The FSCA’s regulatory approach will no longer be sector based – which lends itself to silos – but grouped according to functions, in line with the strategy of consolidating sectoral laws into the Conduct of Financial Institutions Act. . This means that the licensing of all new entities, regardless of sector, will be done centrally. The same approach will be taken for l conduct of business supervision, pensions an financial markets supervision. Although this approach is fit for the purpose of regulating on the basis of activity, the FSCA recognises the uniqueness of different types of financial institutions and is therefore building the skills and capacity required to address the nuances of the different types of regulated entities.
There are six strategic pillars outlined in the new FSCA strategy and each requires not only strategic organisational design and infrastructure changes, but also an expansion on the current skills. As such, the recruitment drive is in full swing, and the upskilling of current staff for new functions is also underway. This provides opportunitiesfor the development of the organisation’s people as the institution grows.
