This article was first published in the Financial Mail on 09 July 2026.
When we discuss the independence of financial regulators, we usually worry about political interference. We ask whether politicians are exerting undue influence over institutions such as the Reserve Bank, the Prudential Authority and the Financial Sector Conduct Authority. But political interference is not the only threat to independence.
Excessive proximity between regulators and the industries they regulate also presents a risk.
South Africa’s financial sector is small. The pool of senior executives, policymakers and regulators is smaller still. Over time, people move between banks, insurers, asset managers, regulators and the government. Former regulators join boards. Former National Treasury officials become bank executives. Industry leaders take up advisory roles and public appointments. They attend the same conferences, participate in the same forums and often share long professional histories.
None of this is inherently improper. Expertise and experience are essential to effective regulation.
Yet the concentration of knowledge, influence and relationships within a relatively small ecosystem creates risks of its own.
The concern is not corruption, or even that regulators consciously favour industry interests. Rather, it is that familiarity can erode the distance needed for independent judgement. The closer regulators and regulated entities become, the greater the risk of groupthink, institutional blind spots and a narrowing of the range of perspectives that shape decision-making.
In such environments, certain assumptions can become accepted wisdom. Not because they have been rigorously tested against alternatives, but because everyone around the table shares a similar professional background and worldview.
Climate risk offers an example.
South African regulators have repeatedly acknowledged that climate change poses material and potentially systemic risks to the financial system. Banks, insurers and asset managers have likewise recognised the importance of managing climate-related risks and opportunities. The language of transition planning, climate resilience and sustainable finance has become commonplace across the sector.
Yet despite widespread agreement on the scale and urgency of the challenge, regulatory responses remain largely focused on disclosure, risk management and voluntary transition planning.
These measures have value. Transparency matters. Risk assessment matters. But if climate change presents a systemic threat to economic and financial stability, why does so much of the response remain discretionary?
This is not an argument for any particular regulatory intervention. Rather, it raises a broader question: does a tightly interconnected financial ecosystem encourage policymakers to favour incremental and consensus-driven approaches, even when the risks they identify may warrant more ambitious action?
The challenge is that proximity can make it difficult to distinguish between what is genuinely prudent and what is simply comfortable. Ideas that align with prevailing industry preferences can come to seem reasonable and inevitable. Alternative approaches may struggle to gain traction, not because they lack merit but because they sit outside the dominant frame of reference.
The same dynamic may be visible in executive remuneration.
Across the financial sector, boards routinely benchmark executive pay against peers. Remuneration consultants provide market comparisons. Directors seek to attract and retain talent. Each individual decision appears rational.
Yet collectively, the result is often a ratchet effect. One institution increases pay. Others follow. The benchmark shifts. The process repeats.
No single actor intends to drive remuneration ever higher. Nevertheless, pay levels continue to rise, often with limited scrutiny of whether they remain proportionate to long-term value creation or broader social outcomes.
Again, the issue is not misconduct. It is the tendency of closely connected systems to reinforce their own assumptions.
Banks provide a useful case study because of their economic importance and their central role in the financial system. But this phenomenon is not confined to banking. Similar dynamics can emerge across asset management, insurance, pension funds and financial policymaking more broadly.
The question, then, is not whether South Africa’s financial regulators are independent in a formal sense. They are. The question is whether formal independence is enough.
Effective oversight requires more than legal separation between regulator and regulated. It requires sufficient distance to challenge prevailing assumptions, to welcome dissenting perspectives and to resist the gravitational pull of industry consensus.
As South Africa confronts complex challenges ranging from climate change to inequality and economic transformation, the quality of our public institutions will matter more than ever. That includes the institutions responsible for overseeing the financial system.
We should continue to guard against political interference. But we should also ask a more uncomfortable question: what happens when independence is not undermined by pressure from outside but by excessive familiarity within?
In a small and interconnected financial sector, this is a risk we must be prepared to recognise.
Nicole Martens is executive director of Just Share
IMAGE: dookdui@123rf Free