One of the fundamental issues in implementing the Twin Peaks regime is deciding where the prudential supervisor should be housed, given that so far three options have been explored; namely, the prudential supervisor could be outside the central bank, or be a subsidiary of the central bank, or be completely inside the central bank. In this regard, a key question is the nature and extent of central bank involvement in the Twin Peaks model. The aim of this chapter is twofold: first, it offers a systematic review of the economics and politics of central bank involvement in a Twin Peaks regime. Secondly, it analyses the central bank’s position in the countries that have already adopted the Twin Peaks model in order to better understand how the general theoretical and empirical results already obtained in exploring central bank involvement in supervision can be applied in analysing the actual Twin Peaks regimes.

This chapter discusses the role of the central bank in the design of the Twin Peaks model in South Africa, including the structure of the prudential regulator within the South African Reserve Bank (SARB), the mandate of the SARB in the Twin Peaks regulatory framework and the various design choices that South Africa has made in relation to the central bank.