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Prudential Financial Regulation Analysis

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Introduction
Several documentation and publications provide insights and postulations of the occurrences and events that occurred in the financial sector in the last decade resulting in severe banking crises 1. The Central Banks and financial regulators responded by protecting the fragile financial industry and possibly prevented a further contagion it would have on the larger economy by intervening appropriately. Interventions to the financial system included the introduction of new credit lines, issuance of deposit guarantees and provision of financial regulatory and prudential framework. Most notably the passage of the Dodd-Frank Act2 to prevent such future occurrences which posed challenging and deeper questions as to” how the regulatory-supervisory …show more content…

J. Flannery’s (1995) argument for prudential regulation implicitly asserts that the supervision and control exerted by private market forces are somehow inappropriate5 and literature tends to examine financial regulation by focusing on the measures that can void managers of financial firms, ‘acting in their own interest. Hanson, Kashyap, and Stein, (2010.pp 1-2.).
This paper details the systems of Prudential financial regulations in the United States of America (USA) and South African (SA) following extensive review and considers components of prudential regulatory systems as the regulatory structure; capital requirements; disclosure requirements; bank examination (auditing, stress tests, etc.); supervision, which can be based on the discretionary power of the authorities or on controls on the application of fixed …show more content…

The monitoring and regulation of Bank activities are under the advice of the BANK ACT 1990 and its associated regulations; Mutual Bank Acts 1993; Co-operative Bank Act 2007; Currency and Exchange Act 1993;
Recent key regulatory developments in South Africa: Regulation to date of the financial industry is sector-specific regulation. Banks are regulated by the Bank Supervision Department of the SARB (South African Reserve Bank, which is its central Bank). Non-banking financial institutions are regulated by the FSN (Financial Services Board), independently from, and not accountable to, the Department of Finance.
However, this is set to change with the implementation of the twin peaks model of financial regulation which in effect will in effect have a prudential regulator (known as the Prudential Authority) housed within the SARB with the function to promote and harness the safety of the regulated financial institutions and a Financial sector conduct authority tasked with protecting financial customers through supervising market

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