Financial Crisis Management Under the Twin Peaks Model of Financial Regulation – Australia and the UK Compared

Published as Chapter 3 in 'Regulation and the Global Financial Crisis: Impact, Regulatory Responses, and Beyond' edited by D Cash and R Goddard, Routledge, London, 2020, pp. 61-84

U of Melbourne Legal Studies Research Paper No. 938

20 Pages Posted: 6 Jan 2021 Last revised: 3 Jun 2021

See all articles by Andrew Godwin

Andrew Godwin

Melbourne Law School

Steve Kourabas

Monash University - Faculty of Law

Ian Ramsay

Melbourne Law School - University of Melbourne

Date Written: March 3, 2020

Abstract

This chapter explores the operation of the Twin Peaks model of financial regulation in the context of financial crisis management and compares the model in Australia with the model in the UK. The comparison reveals significant differences in terms of each jurisdiction’s approach to financial crisis management. In Australia, the legislative framework does not make specific reference to financial crisis management and essentially involves collective responsibility on the part of the regulators for managing a financial crisis. Further, financial stability is generally addressed through microprudential regulation. The framework in the UK, on the other hand, contains detailed provision as to ‘who is in charge of what, and when’ and vests primacy responsibility for financial crisis management in the Bank of England. Each approach has its advantages and disadvantages. The Australian approach is heavily dependent on having the right culture of coordination and, some might argue, has not yet been fully put to the test. By comparison, the UK approach provides an overarching framework for macroprudential regulation, under which systemic financial stability is elevated as a primary regulatory objective and mechanisms are in place to ensure that this objective is achieved.

Keywords: financial regulation; financial crises; microprudential regulation; macroprudential regulation

Suggested Citation

Godwin, Andrew and Kourabas, Steve and Ramsay, Ian, Financial Crisis Management Under the Twin Peaks Model of Financial Regulation – Australia and the UK Compared (March 3, 2020). Published as Chapter 3 in 'Regulation and the Global Financial Crisis: Impact, Regulatory Responses, and Beyond' edited by D Cash and R Goddard, Routledge, London, 2020, pp. 61-84, U of Melbourne Legal Studies Research Paper No. 938, Available at SSRN: https://ssrn.com/abstract=3739716 or http://dx.doi.org/10.2139/ssrn.3739716

Andrew Godwin

Melbourne Law School ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Steve Kourabas

Monash University - Faculty of Law ( email )

Wellington Road
Clayton, Victoria 3800
Australia

Ian Ramsay (Contact Author)

Melbourne Law School - University of Melbourne ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61 3 8344 5332 (Phone)

HOME PAGE: http://law.unimelb.edu.au/about/staff/ian-ramsay

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