Retail Market Conduct Reforms in South Africa Under Twin Peaks

Abstract

This article examines retail market regulatory reforms currently underway, as part of the implementation of a Twin Peaks regulatory model in South Africa. A brief account is provided of the history of these reforms, followed by an analysis of the normative goals put in place for a new market conduct and consumer protection regime; and the developmental needs that inform those goals. Thereafter the article explores the inter-relationship between the existing credit regulator and the soon to be established Financial Sector Conduct Authority. An analysis is then provided of accountability mechanisms, as well as failures exhibited by those mechanisms in the UK and Australia. Finally an argument is made for a “regulator for the regulators”, in order to address past regulatory failures.

ORCID

Andrew Schmulow http://orcid.org/0000-0003-3347-474X

Notes

1 Taylor coined the term as a winking nod to the eponymous David Lynch television mini-series, current at the time (conversation with Dr Michael Taylor and the author, 2014). The term also easily allows for metaphors that riff off the original ‘Twin Peaks’ regulatory design. This proves useful in conveying complex regulatory ideas, expressed so as to provide for a quick and easy comparative analysis. For example in the United States many in the field have taken to referring to their model as ‘rolling hills’ (conversation with Patricia McCoy, Foundation Head: Mortgage and Home Equity Markets division, United States Consumer Financial Protection Bureau, April 2017). In conveying a view on the South African reforms, one member of the Standing Committee on Finance of the National Assembly described South Africa's Twin Peaks “as a ‘mountain’, ‘two peaks’ and a ‘molehill’.” Standing Committee on Finance, Report of the Standing Committee on Finance on its Study Tour to the United Kingdom from 07 to 11 December 2015 (Tabled Reports, 2016), p. 12.

2 Michael W. Taylor, “Twin Peaks”: A regulatory structure for the new century, 1995.

3 Ibid, p. 7.

4 Ibid, p. 6.

5 Ibid, p. 4. See also: Eric J. Pan, ‘Structural Reform of Financial Regulation’ (2011) 19 Transnational Law & Contemporary Problems 796, p. 830; Heidi Mandanis Schooner and Michael Taylor, ‘United Kingdom and United States Reponses to the Regulatory Challenges of Modern Financial Markets’ (2003) 38 Texas International Law Journal 317, p. 630; Henriëtte Prast and Iman van Lelyveld, New Architectures in the Regulation and Supervision of Financial Markets and Institutions: The Netherlands DNB Working Paper, 2004, p. 6/12ff/25; Michael W. Taylor, Peak Practice: How to reform the UK's regulatory system, 1996; Michael Taylor, ‘The Search for a New Regulatory Paradigm’ (1998) 49 Mercer Law Review 793, p. 800; Michael W. Taylor, ‘Twin Peaks’ Revisited … a second chance for regulatory reform, 2009.

6 Taylor, “Twin Peaks”: A regulatory structure for the new century, p. 7. See also: David T. Llewellyn, Institutional Structure of Financial Regulation and Supervision: The Basic Issues (The World Bank 2006), p 10, § 1.

7 Llewellyn, Institutional Structure of Financial Regulation and Supervision: The Basic Issues, p. 27; Working Group on Financial Supervision, The Structure of Financial Supervision. Approaches and Challenges in a Global Marketplace (Special Report, 2008), p. 24. See also: Michael W. Taylor, ‘The Road from “Twin Peaks” - and the Way Back’ (2009–2010) 16 Connecticut Insurance Law Journal 61; Eddy Wymeersch, ‘The Structure of Financial Supervision in Europe: About Single Financial Supervisors, Twin Peaks and Multiple Financial Supervisors’ (2007) 8 European Business Organization Law Review (EBOR) 237; Dirk Schoenmaker and Jeroen Kremers, ‘Financial stability and proper business conduct. Can supervisory structures help to achieve these objectives?’ in Robin Hui Huang and Dirk Schoenmaker (eds), Institutional Structure of Financial Regulation: Theories and International Experiences (Institutional Structure of Financial Regulation: Theories and International Experiences 1st edn, Routledge 2014); Jeroen Kremers and Dirk Schoenmaker, Twin Peaks: Experiences in the Netherlands (LSE Financial Markets Group Paper Series, 2010).

8 Stan Wallis and others, Financial System Inquiry, 1997.

9 Republic of South Africa National Treasury, A safer financial sector to serve South Africa better (National Treasury Policy Document, 2011), p. 28/29/40; Financial Regulatory Reform Steering Committee, Implementing a twin peaks model of financial regulation in South Africa, 2013, p. 22/23; Bryane Michael, ‘The “Twin Peaks” Regulatory Model: The Future of Financial Regulation?’ (2014) Banking Today 1, p. 3/4.

10 Pieter Cornelis Smit, Economics: A Southern African Perspective (Juta & Co, Ltd 1996, p. 421.

11 See further: A. D. Schmulow, ‘Financial Regulatory Reform In South Africa: The Move Towards Twin Peaks’ (2017) 25 African Journal of International and Comparative Law: Revue Africaine de Droit International et Comparé 393, p. 401; R. Havemann, ‘Twin Peaks in South Africa’ in A. J. Godwin and A. D. Schmulow (eds), The Cambridge Handbook of Twin Peaks Financial Regulation (The Cambridge Handbook of Twin Peaks Financial Regulation, Cambridge University Press 2018).

12 For more see: H. B. Falkena and others, Financial Regulation in South Africa: Chapter 1 (SA Financial Sector Forum 2001); Erika Botha and Daniel Makina, ‘Financial Regulation And Supervision: Theory And Practice In South Africa’ (2011) 10 International Business & Economics Research Journal 27.

13 National Treasury, A safer financial sector to serve South Africa better.

14 The influence of the GFC is evident, for example, in the analysis provided by the Standing Committee on Finance of the National Assembly. Finance, Report of the Standing Committee on Finance on its Study Tour to the United Kingdom from 07 to 11 December 2015, pp. 1/3/13/14.

15 Republic of South Africa National Treasury, Twin Peaks in South Africa: Response and Explanatory Document - Accompanying the Second Draft of the Financial Sector Regulation Bill (National Treasury Policy Document, 2014), p. 5, ‘Principle 3.’

16 Ibid, p. 6, ‘Principle 11.’

17 Republic of South Africa National Treasury, Treating Customers Fairly in the Financial Sector: A Draft Market Conduct Policy Framework for South Africa (National Treasury Dicussion Document, 2014).

18 Ibid, p. 8.

19 J. Carmichael, ‘Reflections on 20 Years of Regulation under Twin Peaks’ in A. J. Godwin and A. D. Schmulow (eds), The Cambridge Handbook of Twin Peaks Financial Regulation (The Cambridge Handbook of Twin Peaks Financial Regulation, Cambridge University Press 2018), p. 16.

20 Ibid.

21 Ibid.

22 See for example: Katherine Child, (2017) ‘Top treasury official quits in row over free tertiary education’ Times Live (Johannesburg, ZA 13 November) Sunday Times https://www.timeslive.co.za/politics/2017-11-13-top-treasury-official-quits-in-row-over-free-tertiary-education/.

23 Financial Sector Regulation Act.

24 United Nations, Statistical annex (World Economic Situation and Prospects, 2015), p. 140.

25 A. J. Godwin and A. D. Schmulow, ‘The Financial Sector Regulation Bill In South Africa: Lessons From Australia’ (2015) 132 South African Law Journal 756, p. 756; A.J. Godwin and A.D Schmulow, The Financial Sector Regulation Bill In South Africa: Lessons From Australia (The Centre For International Finance and Regulation (CIFR) Research Working Paper Series, 2015).

26 International Monetary Fund Asia and Pacific Department, Republic of Korea: 2013 Article IV Consultation - Staff Report, Press Release and Statement by the Executive Director for the Republic of Korea (International Monetary Fund 2014), p. 62.

27 Office of the Superintendent of Financial Institutions, ‘Opening remarks to the Senate Standing Committee on Banking, Trade and Commerce, by Superintendent Jeremy Rudin, Ottawa’ (Office of the Superintendent of Financial Institutions, 5 November, 2014) http://www.osfi-bsif.gc.ca/eng/osfi-bsif/med/sp-ds/Pages/jr20141105.aspx, accessed 16 November 2017.

28 Folarin Akinbami, ‘Overhauling the institutional structure of financial regulation in Nigeria: The unfinished reform’ (2016) 17 Journal of Banking Regulation 311.

29 GRC Professional, ‘Building a sound regulatory framework in Kenya’ (Governance Risk Compliance Institute, 18 April, 2017) https://www.thegrcinstitute.org/news/view/2379, accessed 16 November 2017.

30 A. J. Godwin, G. Li and I. Ramsay, Is Australia's ‘Twin Peaks’ System of Financial Regulation a Model for China? (Oxford Business Law Blog 2016).

31 M. van Hengel, P. Hilbers and D. Schoenmaker, ‘Experiences with the Dutch twin peaks model: Lessons for Europe’ in JA Kellermann, J de Haan and de Vries F (eds), Financial Supervision in the 21st Century Financial Supervision in the 21st Century, Springer (2013), p. 188. For more see: Donato Masciandaro and Marc Quintyn, ‘Regulating the Regulators: The Changing Face of Financial Supervision Architectures before and after the Crisis’ (2009) 6 European Company Law 187, p. 188/9.

32 European Central Bank, EUROSYSTEM, Recent Developments in Supervisory Structures in the EU Member States (2007–2010), 2010, p. 5.

33 International Monetary Fund, Australia: Basel Core Principles for Effective Banking Supervision—Detailed Assessment of Observance (Financial Sector Assessment Program Update, IMF Country Report No 12/313, 2012), p. 4. Some have ascribed this success to the way in which Twin Peaks better ventilates the Basel Core Banking Principles for bank stability, and similar principles expressed by the G20. Brooke Masters, ‘Focus on G20 vow to raise financial standards’ The Financial Times (London 15 October, 2009) Front Page http://www.ft.com/intl/cms/s/0/0f7f1bee-b923-11de-98ee-00144feab49a.html#axzz3OIUgUYaw. See also: A. D. Schmulow, Twin Peaks: A Theoretical Analysis (The Centre For International Finance and Regulation (CIFR) Research Working Paper Series, 2015).

34 International Monetary Fund, Australia: Basel Core Principles for Effective Banking Supervision—Detailed Assessment of Observance, p. 4. See also Jennifer G. Hill, Why Did Australia Fare So Well in the Global Financial Crisis? (The Regulatory Aftermath of The Global Financial Crisis, in Sydney Law School Research Paper, 2012), p. 16ff.

35 Statistics South Africa, Mid-year population estimates (Statistical release, 2015), p 2. Up from 52 million recorded in the 2011 census. SouthAfrica.info, ‘South Africa's population’ (South Africa.info, October, 2015) http://www.southafrica.info/about/people/population.htm#.Vk1NgoSZgVw, accessed 19 November, 2016.

36 Jami Solli-Hubbard (ed.), Responsible lending: An international landscape (News and Media, Resource Zone, 2013), p 71.

37 United Nations, Statistical annex, p. 156.

38 Stephanie Pretorius, ‘SA's real level of literacy’ The Citizen (Johannesburg, ZA 29 August, 2013) National http://citizen.co.za/31407/literatez/.

39 United Nations Development Programme, Human Development for Everyone (Human Development Report, 2016), p. 206, Table 3.

40 A ratio of the richest 10 per cent of the population's share of gross national income, divided by the poorest 40 per cent's share.

41 United Nations Development Programme, Human Development for Everyone, p. 206, Table 3.

42 Ibid, p. 206, Table 3.

43 See for example: Ira Goldstein, ‘Why the Poor Pay More: How to Stop Predatory Lending’ in Gregory D. Squires (ed), Business & Economics (Business & Economics, Greenwood Publishing Group 2004). Frances Coppola, ‘South Africa Has Bailed Out A Predatory Lender’ Forbes (Jersey City, NJ 12 August 2014) Investing http://www.forbes.com/sites/francescoppola/2014/08/12/south-africa-has-bailed-out-a-predatory-lender/, citing the near-failure of African Bank Ltd, and the bankruptcy of its furniture retailer subsidiary, Ellerine Furnishers (Pty) Ltd states: “So not only was [African Bank] able to keep [Ellerine Furnishers] alive by providing loans to the poor so they could buy furniture they couldn't afford, it also fleeced them on interest rates.”

44 For more on the ‘Marikana Massacre’, see: A.D. Schmulow, ‘Curbing reckless and predatory lending: A statutory analysis of South Africa's National Credit Act’ (2016) 24 Competition and Consumer Law Journal 220, p. 233ff.

45 Milford Bateman, ‘Microcredit and Marikana: how they are linked’ The Star (Johannesburg, ZA 18 September, 2012) http://sbeta.iol.co.za/the-star/microcredit-and-marikana-how-they-are-linked-1385126, p. 2.

46 Ibid, p. 3.

47 ‘In 2006 Countrywide financed 20% of all mortgages in the United States, at a value of about 3.5% of United States GDP, a proportion greater than any other single mortgage lender.’ Ray Martin, ‘Bank of America's great mortgage give-away’ (CBS Interactive Inc., 9 May, 2012, 10:32 am) http://www.cbsnews.com/news/bank-of-americas-great-mortgage-give-away/, accessed 26 September 2015. Bank of America paid US$ 2.5 billion for Countrywide Financial in 2008, and subsequently lost in excess of US$ 50 billion when Countrywide collapsed. Rick Rothacker, ‘The deal that cost Bank of America $50 billion – and counting’ The Charlotte Observer (Charlotte, NC 16 August, 2014) News, Business, Banking http://www.charlotteobserver.com/news/business/banking/article9151889.html. Bank of America's losses were covered by a US$ 45 billion dollar, taxpayer-funded bail-out from the Troubled Asset Relief Program (TARP). Pro Publica, Bailout Recipients (Bailout Tracker, Tracking Every Dollar and Every Recipient, 2015).

48 L. Randall Wray, ‘Setting the Record Straight One More Time: BofA's Rebecca Mairone Fined $1Million; BofA Must Pay $1.3Billion’ New Economic Perspectives http://neweconomicperspectives.org/2014/08/setting-record-straight-one-time-bofas-rebecca-mairone-fined-1million-bofa-must-pay-1-3billion.html, accessed 26 June, 2015. See also: Edward Wyatt, ‘Promises Made, Then Broken, By Firms in S.E.C. Fraud Cases’ New York Times (New York, NY 8 November, 2011) Business Day http://www.nytimes.com/2011/11/08/business/in-sec-fraud-cases-banks-make-and-break-promises.html?_r=0. For a full list of firms fined for malpractice and fraud prior to the GFC, see: U.S. Securities and Exchange Commission, SEC Enforcement Actions. Addressing Misconduct That Led To or Arose From the Financial Crisis, 2015.

49 See further: Benjamin Howell, ‘Exploiting race and space: Concentrated subprime lending as housing discrimination’ (2006) 94 California Law Review 101; Carolina Reid and Elizabeth Laderman, The untold costs of subprime lending: Examining the links among higher-priced lending, foreclosures, and race in California (Community Development Working Paper Series, 2009); Jacob S Rugh and Douglas S Massey, ‘Racial segregation and the American foreclosure crisis’ (2010) 75 American Sociological Review 629.

50 Part of Mr James Shipton's reaction to the announcement that he is to be appointed Chair of the Australian Securities and Investments Commission (ASIC), Australia's Twin Peak market conduct and consumer protection agency. Patrick Durkin, ‘James Shipton appointed ASIC chairman’ Australian Financial Review (Sydney, NSW 17 October, 2017) News http://www.afr.com/news/james-shipton-appointed-asic-chairman-20171016-gz274h.

51 National Treasury, Treating Customers Fairly in the Financial Sector: A Draft Market Conduct Policy Framework for South Africa, p. 6.

52 Ibid, p. 6. See also: Klaus Kessler and others, Improving Financial Inclusion in South Africa (Publications, 2017); The World Bank Group, ‘South Africa’ (The World Bank Group, 2014) http://datatopics.worldbank.org/financialinclusion/country/south-africa, accessed 10 November 2017; National Credit Regulator, ‘Consumer Credit Market Report (CCMR)’ (National Credit Regulator, 2016) http://www.ncr.org.za/consumer-credit-market-report-ccmr, accessed 25 August, 2016; Penelope Hawkins, Pricing of and Access to Consumer Credit (Research Report Summary, 2009).

53 Finmark Trust, Results from FinScope South Africa 2016 Survey on Financial Inclusion (Finmark Trust 2016), p. 1.

54 See further: Schmulow, Twin Peaks: A Theoretical Analysis.

55 National Treasury, Treating Customers Fairly in the Financial Sector: A Draft Market Conduct Policy Framework for South Africa, p. 8.

56 Ibid, p. 6.

57 During 2014 the author, along with Andrew Godwin, engaged in a conversation with the South African National Treasury on the Financial Sector Regulation Bill, as it then was. One of the recommendations we made concerned the issue of a ‘lead regulator’. We argued that such a concept undermines the separation of powers between the two peaks, and will make consumer protection subservient to financial system stability whenever a situation arises where there are any stability considerations. The concept of ‘lead regulator’ was subsequently abandoned in the second draft of the Bill.

58 See further: Schmulow, ‘Curbing reckless and predatory lending: A statutory analysis of South Africa's National Credit Act’. See also: National Credit Regulator, ‘Home’ (National Credit Regulator, 2016) http://www.ncr.org.za, accessed 2 August, 2016.

59 National Credit Act.

60 Ss 26 - 34, ibid. See further: Developmentnomics (Pty) Ltd, Literature Review on the Impact of The National Credit Act (NCA) has had on South Africa's Credit Market (Final Report, 2012).

61 National Consumer Credit Protection Act (Cth), read with the National Consumer Credit Protection Regulations (Cth).

62 Credit and Investments Ombudsman, ‘Home’ (Credit and Investments Ombudsman, 2017) https://www.cio.org.au, accessed 13 November, 2017.

63 For more, see: A.D. Schmulow, ‘Protection of Financial Consumers in Australia’ in Hongjoo Jung (ed), An International Comparison of Financial Consumer Protection (An International Comparison of Financial Consumer Protection, Springer 2018).

64 National Credit Act, ss 12-25.

65 Schmulow, ‘Protection of Financial Consumers in Australia’, cf Schmulow, ‘Curbing reckless and predatory lending: A statutory analysis of South Africa's National Credit Act’. Compare in particular provisions relating to debt-relief in cases of reckless lending.

66 For more, see: Schmulow, ‘Curbing reckless and predatory lending: A statutory analysis of South Africa's National Credit Act’.

67 In the United Kingdom the credit regulator, the Office of Fair Trading, was subsumed into the Financial Conduct Authority as part of the UK's transition to Twin Peaks. Financial Conduct Authority, ‘The FCA sets out in detail how it will regulate consumer credit, including payday lending, when it takes over responsibility in April 2014’ (Financial Conduct Authority, 3 March, 2013) https://www.fca.org.uk/news/press-releases/fca-sets-out-detail-how-it-will-regulate-consumer-credit-including-payday, accessed 14 November, 2017.

68 National Credit Act.

69 National Treasury, A safer financial sector to serve South Africa better.

70 Australian Securities and Investments Commission, ASIC's approach to enforcement, 2013, p. 2–4.

71 See note n 39. For more on the dangers of reckless credit extension to the poor in ‘Bolivia, Bosnia, Pakistan, Nicaragua, Morocco and most catastrophically, in Andhra Pradesh State in India, site of 250 000 suicides by indebted farmers’, see: Bateman, ‘Microcredit and Marikana: how they are linked’.

72 Stuart Theobald, The risk of unsecured lending in South Africa (Occasional Research Report, 2013).

73 The National Credit Regulator, Annual Report (NCR Publications, 2014), p. 12.

74 In 2016 55 per cent of South Africa's population was classified as living below the national (that is to say ‘country specific’) poverty line. As at 2011, almost 17 per cent were living on less than US$ 2 per day. The World Bank Group, ‘South Africa’ (The World Bank Group, 2016) http://databank.worldbank.org/data/Views/Reports/ReportWidgetCustom.aspx?Report_Name=CountryProfile&Id=b450fd57&tbar=y&dd=y&inf=n&zm=n&country=ZAF, accessed 10 November, 2017.

75 ‘Bottom of the class; South Africa's schools. Why South Africa has one of the world's worst education systems’ The Economist (London 7 January 2017) Middle East and Africa 37 https://search-proquest-com.ezproxy.library.uwa.edu.au/docview/1856037437?OpenUrlRefId=info:xri/sid:primo&accountid=14681.

76 See note 69 above.

77 Erick F. Gerding, ‘Subprime Crisis and the Link between Consumer Financial Protection and Systemic Risk’ (2009) 4 Florida International University Law Review 435, p. 435.

78 Financial Sector Regulation Act.

79 Ibid, Preamble; s 1(1) (definition of ‘financial sector regulator’); 18; 22; 24; 34; 43; 47(4) and (7); 66(5); 70(4) and (8); 79; 98(3) and (4); 100(3); 106(5); 250.

80 Ibid, s 22(1)(e).

81 Ibid, s 1(1) (definition of ‘financial sector regulator’).

82 Ibid, s 2(1)(g).

83 National Credit Act.

84 Financial Sector Regulation Act, Chapter 4; s 106.

85 See for example the annual reports and statistics released by the NCR in Schmulow, ‘Curbing reckless and predatory lending: A statutory analysis of South Africa's National Credit Act’.

86 See for example: Basel Committee on Banking Supervision, Core Principles for Effective Banking Supervision, 2012, Principle 2 at p. 22 which states: ‘The supervisor … is accountable for the discharge of its duties and use of its resources’; The International Organization of Securities Commissions (IOSCO), Objectives and Principles of Securities Regulation, 2003, Principle 2 at p. i which states: ‘The regulator should be operationally independent and accountable in the exercise of its functions and powers’.

87 In the case of ASIC, submission of reports is required by the Australian Securities and Investments Commission Act (Cth), s 136. For the position in the UK, New Zealand and the Netherlands, see: ‘Accountability mechanisms’ in A. J. Godwin, T. Howse and I. Ramsay, ‘Twin Peaks: South Africa's Financial Sector Regulatory Framework’ (2017) 134 South African Law Journal 665.

88 See for example: Senator Mark Bishop (Chair) and others, Performance of the Australian Securities and Investments Commission, 2014.

89 Media and public oversight should not be underestimated. Media scrutiny of the performance of the Australian regulators has been extremely critical, extensive and long-standing. The result has been persistent demands for a Royal Commission of Inquiry into conduct in the banking sector, and of the conduct of the regulators. For more see ‘Regulatory Failure’ in Schmulow, ‘Protection of Financial Consumers in Australia’.

90 Financial Sector Regulation Act, s 55(1)(c).

91 Public Finance Management Act (as amended), s 55(1)(d)(i).

92 Financial Sector Regulation Act, s 21(c)(i), which states: ‘[The Financial Stability Oversight Committee has the following functions:] to advise the Minister and the Reserve Bank on— (i) steps to be taken to promote, protect or maintain, or to manage or prevent risks to, financial stability.’

93 Ibid, ss 79ff. See also: “Financial System Council of Regulators” in Godwin, Howse and Ramsay, ‘Twin Peaks: South Africa's Financial Sector Regulatory Framework’.

94 Taylor, “Twin Peaks”: A regulatory structure for the new century, p. 11.

95 House of Lords, House of Commons, ‘An accident waiting to happen’: The failure of HBOS (5: A failure of regulation, 2013), § 84, p. 28.

96 Ibid, § 85, p. 28. See also: Financial Services Authority, The failure of the Royal Bank of Scotland (Financial Services Authority Board Report, 2011), § 30, p. 28.

97 Financial Services Authority, The failure of the Royal Bank of Scotland, p. 7.

98 Patrick Hosking, ‘More lever-arch files wouldn't have saved RBS’ The Times (London Tuesday, 13 December 2013) Opinion http://www.thetimes.co.uk/tto/opinion/columnists/article3256069.ece.

99 Financial Services Authority, The failure of the Royal Bank of Scotland, Part 2, Chap. 3, p. 277.

100 For original reference, see: ibid, Table 2.18, p. 280.

101 Ibid, Part 2, Chap. 3, p. 260.

102 Hosking, ‘More lever-arch files wouldn't have saved RBS’.

103 Senator Mark Bishop (Chair) and others, Performance of the Australian Securities and Investments Commission.

104 See further: Schmulow, Twin Peaks: A Theoretical Analysis, p. 47ff; Senator Mark Bishop (Chair) and others, Performance of the Australian Securities and Investments Commission; Adele Ferguson, ‘Royal commission: not a populist whinge for burned bank customers’ The Sydney Morning Herald (Sydney, NSW 13 August 2016) Comment http://www.smh.com.au/business/banking-and-finance/royal-commission-not-a-populist-whinge-for-burned-bank-customers-20160812-gqqyll.html; Adele Ferguson, ‘A banking royal commission couldn't make the sector's reputation any worse’ The Australian Financial Review (Sydney, NSW 11 April 2016) Business/Banking & Finance/Financial Services/Opinion http://www.afr.com/business/banking-and-finance/financial-services/a-banking-royal-commission-couldnt-make-the-sectors-reputation-any-worse-20160410-go2tso; Adele Ferguson, ‘Sweating on every word – how ASIC massaged the banking message’ The Sydney Morning Herald (Sydney, NSW 21 April 2017) Business/Comment http://www.smh.com.au/business/banking-and-finance/sweating-on-every-word--how-asic-massaged-the-banking-message-20170421-gvp9qt.html; Adele Ferguson and Ben Butler, ‘Commonwealth Bank facing royal commission call after Senate financial planning inquiry’ The Sydney Morning Herald (Sydney, NSW 26 June 2014) Banking and Finance http://www.smh.com.au/business/banking-and-finance/commonwealth-bank-facing-royal-commission-call-after-senate-financial-planning-inquiry-20140625-3asy6.html; Adele Ferguson and Deb Masters, Banking Bad (Australian Broadcasting Corporation 2014); Adele Ferguson, ‘Hearing into ASIC's failure to investigate CBA's Financial Wisdom’ The Sydney Morning Herald (Sydney, NSW 3 June 2014) Business Day http://www.smh.com.au/business/hearing-into-asics-failure-to-investigate-cbas-financial-wisdom-20140602-39ept.html; Jane Lee, Cameron Houston and Chris Vedelago, ‘CBA customers lose homes amid huge fraud claim’ The Age (Melbourne, Vic 29 May 2014) Victoria http://www.theage.com.au/victoria/cba-customers-lose-homes-amid-huge-fraud-claim-20140528-394se.html.

105 James R. Barth, Gerard Caprio and Ross Levine, ‘Making the Guardians of Finance Work for Us’, Guardians of Finance: Making Regulators Work for Us (Guardians of Finance: Making Regulators Work for Us, MIT Press 2012), p. 205/6.

106 Ibid, p. 211.

107 Ibid, p. 213.

108 Recommendation 27, Financial System Inquiry, Financial System Inquiry Final Report, 2014, p. 239.

109 Ibid, p. 235.

110 Ibid, p. 239.

111 APRA asserted that there was a difficulty in ‘demonstrating causality or an explicit link between the prudential regime or supervisory actions and the outcomes for individual financial institutions or the financial system as a whole’. Australian Prudential Regulation Authority, Financial System Inquiry Submission, 2014, p. 62; that the secrecy provisions of the Banking Act (Cth) precludes ‘offering public commentary on its day-to-day activities’ and further that ‘performance assessment of a prudential regulator does not lend itself to straightforward cost-benefit analysis.’ Australian Prudential Regulation Authority, Financial System Inquiry Submission, p. 63. Cf Barth, Caprio and Levine, ‘Making the Guardians of Finance Work for Us’, p. 217, where the authors put forward a proposal for a Sentinel, and state: “Sentinel demands for information must trump the desires of regulatory agencies for secrecy”.

112 Pat McConnell, ‘War on banking's rotten culture must include regulators’ The Conversation (Melbourne, VIC 4 June 2015) Business & Economy http://theconversation.com/war-on-bankings-rotten-culture-must-include-regulators-42767. See also: Julie May, ‘Regulatory board to beef up watchdog accountability’ Financial Observer, Daily News for Financial Services Professionals (Sydney, NSW 10 December 2014) News / Financial Planning http://www.financialobserver.com.au/articles/regulatory-board-to-beef-up-watchdog-accountability; Marion Williams, ‘APRA and ASIC need cultural shift’ Asia-Pacific Banking and Finance (Sydney, NSW 9 March 2015) Banking https://www.australianbankingfinance.com/banking/apra-and-asic-need-cultural-shift/; Andrew Schmulow, ‘To clean up the financial system we need to watch the watchers’ The Conversation (Melbourne, VIC 4 March 2015) Business & Economy http://theconversation.com/to-clean-up-the-financial-system-we-need-to-watch-the-watchers-38359; Ruth Williams, ‘Merit in oversight board for ASIC, but only if it's got teeth’ The Sydney Morning Herald (Sydney, NSW 28 January 2015) Business Day http://www.smh.com.au/business/merit-in-oversight-board-for-asic-but-only-if-its-got-teeth-20150127-12z7zy.html. See also: Barth, Caprio and Levine, ‘Making the Guardians of Finance Work for Us’, p. 211.

113 Barth, Caprio and Levine, ‘Making the Guardians of Finance Work for Us’, p. 209.

114 See further: Llewellyn, Institutional Structure of Financial Regulation and Supervision: The Basic Issues, p. 41 on the advantages of regulator accountability.

115 Financial Policy Committee, ‘Financial Policy Committee’ (Bank of England, 2014) http://www.bankofengland.co.uk/financialstability/pages/fpc/default.aspx, accessed 26 September 2014.

116 Jill Treanor, ‘Farewell to the FSA – and the bleak legacy of the light-touch regulator’ The Guardian/The Observer (London, UK 24 March 2013) Business http://www.theguardian.com/business/2013/mar/24/farewell-fsa-bleak-legacy-light-touch-regulator.

117 Barth, Caprio and Levine, ‘Making the Guardians of Finance Work for Us’.

118 Australian Government, Improving Australia's Financial System, Government response to the Financial System Inquiry, 2015, p. 23.

119 See: Barth, Caprio and Levine, ‘Making the Guardians of Finance Work for Us’, p. 207 for an account of the manner in which the US Federal Reserve resisted Congressional oversight, even going so far as to ignore Court orders that they release information on how they measured ‘systemic risk’.