South Africa's Finance Minister Enoch Godongwana presents his 2022 budget in Cape Town, South Africa, February 23, 2022.
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Finance Minister Enoch Godongwana believes the newly launched Corporation for Deposit Insurance (CODI) has the potential to improve South Africa's financial regulatory structure.

CODI is like an insurance plan created for people who keep their money in banks, allowing them to get the money back in case the bank ever has problems in returning the cash.

Speaking at the CODI launch on Thursday in Johannesburg, the minister explained that CODI works as "the consumer protection pillar, securing depositors by guaranteeing access to up to R100 000 of their deposits in case of a bank failure - - an essential safety net in our rapidly evolving financial landscape and advancing the Twin Peaks model," SA News reported.

He added, "The Twin Peaks model revolutionizes financial safety and consumer protection by splitting regulatory duties into two focused areas. One ensures financial institutions are robust and secure, and the other safeguards consumer interests."

Godongwana stressed that this model just not only improves "the system's stability but also bolsters consumer confidence by offering clearer oversight and reducing financial crisis risks."

The Twin Peaks model sets up two special groups - the Financial Sector Conduct Authority and the Prudential Authority - to manage tricky financial systems, helping consumers and investors feel more secure about their money.

This model was first introduced by the National Treasury in 2011 after seeing problems in the global financial crisis.

The minister further explained that the Conduct of Financial Institutions (COFI) bill, slated for parliamentary consideration later this year, has been refined through public consultations and will work as a key to further solidifying this framework.

He noted that the COFI focuses on "preventing bank failures from broadly impacting the financial system," adding that it will also prevent "crises that have historically had devastating socioeconomic effects."

Godongwana pointed out that trust is the basic factor for any financial system to work effectively.

"Yet, global trends, especially post-2008, show a marked decline in trust towards financial regulators, attributed to regulatory failures and perceived alignment with financial elites rather than the public," he said.

He added, "To counteract this, we must adopt a regulatory framework that is as dynamic and proactive as the financial sector itself."

The minister emphasized the importance of adopting transparency, enhancing public understanding and engagement in financial regulation.