Dutch regulator says “Twin Peaks” supervision best

October 9, 2009

twin-peaks-2    By Huw Jones
   BASEL, Switzerland, Oct 9 (Reuters) – The financial crisis has shown that the “Twin Peaks” system of separating prudential and securities supervision being eyed by Germany and Britain works best, the Dutch markets regulator said on Friday.
   The worst market turmoil since the Great Depression has sparked a fundamental rethink of how markets and banks are supervised following a failure to spot risks building up in the system before it was too late.
   “In Europe, we have many single regulators that are both prudential and securities regulators. They have to combine their penchant for confidentiality and for transparency,” Hans Hoogervorst, chairman of the Dutch AFM regulator said.
   “To be effective, a regulator should have a clear, focused sense of purpose. He should never be in a position where he is tempted to sacrifice the goal of transparency to prudential concerns or vice versa,” Hoogervorst told an International Organisation of Securities Commissions conference.
   In the Netherlands, the AFM supervises markets and conduct of business, while the Dutch central banks oversees banks.
   The twin peaks model is also applied in Australia.
   The financial crisis has sparked a rethink in Germany and Britain of their super-regulators which oversee all the market.
   The British opposition Conservative Party, which polls say is favourite to win the next election due by June 2010, has pledged to abolish the Financial Services Authority and hand its prudential or financial safety supervisory duties to the Bank of England.
   The FSA would then be reformed into an agency handling consumer protection and conduct of business.
   In Germany, Chancellor Angela Merkel’s conservatives and their Free Democrat allies have agreed the basics of an overhaul of the country’s banking supervision. [ID:nL8300219]
   Under the agreement, German supervision would be concentrated at the national central bank, the Bundesbank.
   Currently, responsibilities are shared between the Bundesbank and the Bafin supervisory body but the Free Democrats want the central bank to take over full responsibility.
   A 2008 report by former Federal Reserve Chairman Paul Volcker for the U.S. G30 think-tank said no supervisory set up proved “unambiguously superior” in the crisis but the twin peaks arrangement could force a resolution to the conflict between protecting consumers and ensuring broader market stability.
   Regulators say privately there is too much emphasis by policymakers on supervisory structures and not enough on instruments for spotting risks and ensuring that warnings are acted on. (Reporting by Huw Jones, editing by Toby Chopra) ((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326; huw.jones@thomsonreuters.com))
Friday, 09 October 2009 10:00:03RTRS [nL9504577 ] {C}ENDS

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