Australia: Twenty-Five Years of Twin Peaks — What Worked, and What Didn’t.

Australia is the country that named the Twin Peaks model and has lived with it the longest. Twenty-five years of operating data — through the Asian Financial Crisis, the global financial crisis, multiple stress events and the Hayne Royal Commission — make it the single most informative case study available to Caribbean policy-makers, regulators and boards. The honest reading of that record is neither triumphalist nor dismissive. It is that Twin Peaks delivered some genuine outcomes that no other model has matched, and that it failed to prevent some serious conduct outcomes that simpler models had not produced either. Reading the Australian record correctly is the precondition for adapting the model successfully.

The model Australia chose, and why

Twin Peaks did not arrive in Australia by importation. It arrived through a domestic policy review — the 1996 Wallis Inquiry into the Australian financial system — that diagnosed the existing supervisory architecture as no longer fit for purpose. The Reserve Bank of Australia supervised banks. The Insurance and Superannuation Commission supervised insurance and pension funds. The Australian Securities Commission supervised securities markets and listed issuers. Consumer protection sat across multiple regulators with overlapping mandates and inconsistent enforcement. The Wallis Inquiry concluded that the architecture was too sectoral, that prudential and conduct concerns inside the same regulator created chronic trade-offs, and that financial conglomerates spanning sectors could not be supervised coherently under the existing model.

The recommendation was to split supervisory functions along functional rather than sectoral lines. The Australian Prudential Regulation Authority Act 1998 established APRA as the prudential regulator for the entire financial system, transferring banking supervision from the RBA, insurance and pension supervision from the ISC, and certain prudential functions from elsewhere. The Australian Securities and Investments Commission Act 2001 — which evolved from the earlier ASIC Act 1989 — established ASIC as the conduct, market integrity and corporate registry regulator. The RBA retained monetary policy and overall financial stability. A Council of Financial Regulators, comprising APRA, ASIC, the RBA and the Treasury, was established to coordinate.

This is the architecture Jamaica is now adopting in modified form, with the Bank of Jamaica taking the prudential peak (rather than Australia’s separate APRA), and the redesigned Financial Services Commission taking the conduct peak. The Australian model has been adapted, not imported wholesale. But the canonical structure is the same, and the operational lessons of the Australian experience are directly relevant.

What worked: four genuine outcomes

Honest assessments of the Australian Twin Peaks experience — the IMF’s Financial Sector Assessment Programs, the OECD’s regulatory reviews, the World Bank’s comparative analyses, and Australian academic literature — converge on four areas where the model has delivered outcomes that the predecessor architecture would not have produced.

The first is sectoral neutrality in prudential supervision. Before Twin Peaks, banks, insurers and superannuation funds were supervised by different regulators applying different methodologies, with different thresholds for intervention and different cultural relationships with their regulated populations. After Twin Peaks, all prudentially-regulated institutions are supervised by APRA against a common risk-based methodology — Probability and Impact Rating System — that allows direct comparison of risk profiles across sectors. This sounds technical. It matters operationally because financial conglomerates that own banks, insurers and superannuation funds — and most of the largest Australian financial institutions do — are now supervised on a consolidated basis with consistent prudential logic, rather than as a collection of separately-supervised entities. The capital and liquidity weaknesses that emerged at HIH Insurance, despite the regulatory architecture, would have been even harder to detect under a fragmented supervisory model. APRA’s consolidated visibility is real.

The second is the relative resilience of the Australian financial system through the 2008 global financial crisis. Australia’s major banks did not require government recapitalisation. Mortgage default rates remained well below international comparators. Wholesale funding markets functioned through the crisis with extraordinary government support but without bank failures. Multiple factors contributed: macroeconomic conditions, prudent regulatory choices on capital and liquidity in the years preceding the crisis, the geographic concentration of the major banks, and the structure of the Australian housing market. But the supervisory framework — APRA’s risk-based prudential focus, ASIC’s market conduct attention, and the coordinating role of the Council of Financial Regulators — is widely credited with having maintained the right level of vigilance through a period when other supervisory systems lost focus. The IMF’s 2012 FSAP for Australia explicitly cited the Twin Peaks architecture as a contributing factor.

The third is the development of ASIC as a substantively conduct-focused regulator. Before Twin Peaks, conduct supervision was the residual function of regulators whose primary identities were prudential or sectoral. After Twin Peaks, ASIC has built specialist capabilities in market surveillance, retail product distribution, financial advice supervision, enforcement and consumer redress that have become international benchmarks. The Design and Distribution Obligations regime, which came into force in 2021, requires issuers and distributors of financial products to identify a target market for each product and ensure that distribution is consistent with the target market — a structural pre-emption of mis-selling that goes beyond traditional disclosure-based consumer protection. The product intervention powers, which allow ASIC to ban or restrict specific financial products causing significant consumer detriment, are a regulatory tool that did not exist anywhere globally before Australia developed them. Both are international benchmarks now.

The fourth is the resolution architecture. Australia’s Financial Claims Scheme provides depositor protection up to defined limits; the Special Resolution Regime, embedded in the Banking Act and complemented by reforms across multiple statutes, gives APRA tools to manage failing institutions including statutory management, transfer of assets and liabilities to bridge institutions, and compulsory transfers between institutions. These tools were tested and refined through actual stress events including the management of regional bank stresses in 2008–2009 and the orderly resolution of failing insurers in subsequent years. Australia’s resolution toolkit is, by international comparison, one of the more developed and proven.

Twin Peaks delivered outcomes in Australia that no simpler model has matched. It also failed to prevent outcomes that simpler models had not produced. Both readings are true at once.

What didn’t work: the Hayne Royal Commission and what it actually showed

The most consequential moment in the history of Australian Twin Peaks was the establishment in 2017 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry — the Hayne Royal Commission, named after Commissioner Kenneth Hayne. The Commission was established because cumulative evidence of conduct failures across the major Australian banks and financial services firms had become impossible to manage through normal regulatory channels. The Final Report, delivered in February 2019, ran to four volumes and made 76 specific recommendations. The findings were genuinely shocking by any reasonable standard. Charging fees to customers who had died. Charging fees for services that were never provided. Predatory lending to vulnerable customers. Inappropriate financial advice that systematically benefited the adviser at the expense of the client. The cumulative remediation programmes that followed have cost the major Australian financial services firms many billions of Australian dollars in customer compensation and legal costs.

The honest question that the Hayne Royal Commission posed was: how did all of this happen under a Twin Peaks regime that was, on paper, specifically designed to prevent conduct failures? The Final Report identified four contributing factors that are directly relevant to any jurisdiction adopting Twin Peaks today.

The first was that ASIC, despite the architectural mandate, had under-invested in conduct enforcement for an extended period. Penalties imposed had been below the levels needed to deter serious conduct breaches. Enforcement actions had often settled for negotiated outcomes rather than tested in court. Public confidence in ASIC’s willingness to pursue powerful institutions through to penalty had eroded. The Commission’s diagnosis was not that ASIC lacked the powers it needed but that it had not used them with the rigour the Twin Peaks architecture envisaged.

The second was that APRA, despite its prudential focus, had been drawn into culture and conduct issues — particularly within superannuation — without the mandate or the toolkit to address them effectively. The boundary between prudential and conduct supervision is conceptually clean but operationally porous. Conduct failures destroy institutional value, which is a prudential concern. Prudential incentives toward profitability create conduct pressures, which is a conduct concern. The Commission found that APRA had been insufficiently active where conduct issues had prudential implications, and ASIC had been insufficiently active where prudential issues had conduct implications. The coordination architecture had not closed the gap.

The third was that the regulated industry itself had embedded conduct cultures that compliance frameworks had not corrected. Sales-driven incentive structures rewarded volume over suitability. Senior management accountability for specific business outcomes was diffuse. Internal audit and risk functions had been under-empowered relative to revenue-generating functions. The Commission concluded that no regulatory architecture, however well-designed, could correct an industry culture that was structurally aligned to misconduct. Cultural reform had to come from boards and senior management, with regulators as supporting actors.

The fourth was that consumer redress was profoundly inadequate. Customers harmed by institutional misconduct had limited and often impractical pathways to compensation. The Australian Financial Complaints Authority, established in 2018, was created in part to address this gap. The Compensation Scheme of Last Resort, legislated in 2024 to provide compensation where the responsible firm has become insolvent or otherwise unable to pay, was an even later response to a problem the Commission had identified five years earlier. Twin Peaks alone, the Commission found, had not produced consumer redress proportionate to consumer harm. Specific instruments — complaints authorities, compensation schemes, statutory remediation powers — had to be added to the architecture.

What Caribbean policy-makers should take from this

The Australian record produces five lessons that translate directly to the Caribbean Twin Peaks design choices currently being made. None of these lessons is novel within international regulatory analysis. All of them are well-evidenced. All of them are routinely under-applied in fresh Twin Peaks implementations because the architectural success of the model creates a presumption of self-execution that the evidence does not support.

The first is that statutory penalty regimes must be calibrated above the level needed for technical compliance and toward the level needed for cultural deterrence. Australian financial services firms responded to penalties they considered immaterial by treating them as costs of doing business. They responded to penalties they considered material by changing behaviour. The threshold between immaterial and material varies by institution and by breach but the general principle is that penalty regimes that are below the cost of remediating the underlying behaviour will not deter the behaviour. The post-Hayne reforms in Australia substantially increased maximum civil and criminal penalties across the conduct regime. Caribbean Twin Peaks legislation should not require its own Hayne Royal Commission to make this calibration.

The second is that the conduct regulator must be resourced and empowered to bring difficult cases through to enforced outcomes. Settlement-driven enforcement has lower deterrent value than tested-in-court enforcement. Regulators that have built reputations for settling rather than litigating face an enforcement disadvantage that takes years to reverse. The new FSC in Jamaica will inherit ASIC’s recognition that early enforcement record sets supervisory expectations for years. The cases the regulator chooses to bring, the penalties it pursues, and the public visibility of its outcomes will shape institutional behaviour across the Caribbean financial sector through the rest of the decade.

The third is that the prudential and conduct boundary needs operational protocols, not just statutory clarity. APRA and ASIC operate a Memorandum of Understanding that sets out specific information-sharing protocols, joint examination triggers, escalation pathways and coordination mechanisms. Even with this MOU, the Hayne Commission found gaps. The Caribbean regime, building on Australia’s experience, should design coordination mechanisms with greater operational specificity than the Australian original — defined supervisory data flows, defined joint-examination triggers, defined escalation timelines. The Practice Period that Jamaica is currently running is, in part, exactly this work.

The fourth is that culture in regulated institutions cannot be corrected by regulation alone. The Hayne Commission’s most uncomfortable finding for the Australian financial sector was that the misconduct identified was not aberrational but structural — embedded in incentive systems, governance arrangements, and senior management accountability frameworks that had been allowed to evolve in ways that made misconduct profitable. Boards that read this finding as a critique of the financial services industry are missing the point. The point is that boards themselves are responsible for cultural conditions that no external regulator can fix. Caribbean boards facing Twin Peaks should treat the cultural diagnostic as a board-level priority on its own terms, not as a regulatory imposition.

The fifth is that consumer redress must be designed in from the beginning. The Australian Financial Complaints Authority and the Compensation Scheme of Last Resort were both reactive — established to fix problems that the original Twin Peaks design had not anticipated. The Caribbean Twin Peaks transition has the opportunity to embed consumer redress in the original design rather than adding it later. A statutory complaints authority, an industry-funded compensation scheme, and statutory remediation powers for the conduct regulator are not optional features of a credible Twin Peaks regime. They are essential.

The Hayne Commission’s most uncomfortable finding was that the misconduct identified was not aberrational but structural. Boards that read this as a critique of the financial services industry are missing the point.

What boards should examine in light of the Australian record

For Caribbean boards, the Australian record produces three specific examinations that should be conducted before, not after, the Twin Peaks cutover.

The first is an honest assessment of incentive structures across the institution. Sales targets, bonus structures, performance metrics and promotion pathways collectively shape the behaviour the institution actually rewards. Where these structures reward volume over suitability, growth over stability, or short-term metrics over long-term customer outcomes, the institution is structurally exposed to conduct failures of the type the Hayne Commission documented. This is not a compliance question. It is a board governance question. Boards that have not subjected their incentive structures to this assessment in the past three years should commission one this year.

The second is a senior management accountability review. The Australian Banking Executive Accountability Regime, introduced in 2018, requires APRA-regulated institutions to identify, by name, the senior executive responsible for each defined business function and to hold those executives personally accountable for outcomes within their scope. Whether the Caribbean Twin Peaks legislation introduces a comparable regime or not, the direction of regulatory travel internationally is unambiguous. Boards should pre-emptively document, for each business line and each control function, which senior executive is personally accountable for which outcomes, and how that accountability is evidenced in supervisory documentation, performance evaluation and remuneration.

The third is a customer outcome data review. Conduct supervision is increasingly outcomes-based — assessed not by whether the institution complied with disclosure rules but by whether customers achieved good outcomes from the products and services they bought. Boards should ask: do we know what outcomes our customers achieve? Do we have data on suitability, on complaints, on resolution, on customer satisfaction, on harm to vulnerable customers? Could we produce this data on regulatory request, by business line, with adequate granularity? Australian institutions that could not answer these questions affirmatively in 2018 spent the years following the Hayne Commission building the data infrastructure to answer them. Caribbean institutions have the opportunity to build it before the question is asked.

The honest assessment, in summary

Australia did not adopt Twin Peaks because the architecture was theoretically attractive. It adopted Twin Peaks because the predecessor model had failed in identifiable ways and a better model was available. Twenty-five years of operating evidence shows that the architecture has produced genuine outcomes — sectoral neutrality in prudential supervision, GFC resilience, a substantively conduct-focused regulator, and a developed resolution toolkit — that no simpler model has matched. The same record shows that the architecture, on its own, did not prevent conduct failures of the kind the Hayne Commission documented, and that supplementary instruments — penalty calibration, enforcement culture, coordination protocols, accountability regimes, consumer redress — were necessary additions to make the regime fully effective.

For the Caribbean, this honest assessment is more useful than the simpler narrative either side might prefer. Twin Peaks works. Twin Peaks alone is not enough. The Caribbean transition can avoid the Australian failures by designing in, from the outset, the supplementary instruments that Australia added later. The architectural decision is the easy part of the reform. The harder work — calibrating penalties, building enforcement culture, defining coordination protocols, embedding accountability regimes, establishing consumer redress mechanisms — is what will determine whether the Caribbean regime delivers the prevention that the architecture promises. The Australian record is the most informative guide to that harder work that any emerging-market jurisdiction has access to. The institutions, regulators and policy-makers who study it carefully will be better prepared than those who treat it as background reading.

 

PARTNER WITH DAWGEN GLOBAL Learning from Australia, Building for the Caribbean Twenty-five years of Australian Twin Peaks evidence is the single most informative case study available to Caribbean institutions. The lessons — on penalty calibration, enforcement culture, coordination protocols, accountability regimes and consumer redress — translate directly to the choices Caribbean boards, senior management and control functions must make in 2026. Dawgen Global helps institutions build the operational standards that the Australian record shows are necessary for Twin Peaks to deliver its promised outcomes — Big Firm capabilities, with Caribbean understanding. Six advisory engagements designed for this moment: ▸  Conduct Culture Diagnostic — independent assessment of incentive structures, sales targets, bonus arrangements and performance metrics against the cultural failures identified in the Hayne Royal Commission and comparable regulatory inquiries. ▸  Senior Management Accountability Mapping — preparing for the introduction of individual accountability provisions through documentation of senior executive responsibilities, evidence of oversight, and accountability frameworks aligned to the Australian BEAR, UK SMCR and emerging Caribbean standards. ▸  Customer Outcomes Data Infrastructure — building supervisory-grade data on suitability, complaints, resolution, customer satisfaction, vulnerable customer treatment and product performance ahead of regulatory reporting requirements. ▸  Penalty Risk Assessment — modelling potential civil money penalty exposure under the post-Hayne calibration the new FSC is likely to adopt, and identifying remediation priorities to reduce that exposure. ▸  Coordination Protocol Readiness — designing internal frameworks for engaging with two specialist regulators on overlapping issues, including supervisory communications protocols and escalation pathways. ▸  International Best Practice Benchmarking — for institutions seeking to position themselves as Caribbean leaders, structured comparison of governance, conduct frameworks and customer outcome reporting against APRA-regulated and FCA-regulated peer institutions. Begin the conversation today. Email: [email protected]

COMING NEXT IN THIS SERIES

Article 5  —  The United Kingdom: From the FSA to the PRA and FCA — A Model in Continuous Reform

The United Kingdom adopted Twin Peaks in 2013 after concluding that its previous unified regulator had failed during the global financial crisis. The next article in this series examines the UK record — the Financial Conduct Authority’s pioneering Consumer Duty, the Senior Managers and Certification Regime, and the continuous reform agenda that distinguishes the UK approach. The lessons for outcomes-based conduct regulation in the Caribbean are direct.

ABOUT THE AUTHOR

Dr. Dawkins Brown is the Executive Chairman and Founder of Dawgen Global, an independent, integrated multidisciplinary professional services firm headquartered in New Kingston, Jamaica, operating across more than fifteen Caribbean territories. With Big Four heritage and over twenty-three years of professional experience, Dr. Brown writes regularly on Caribbean financial regulation, capital markets, governance and strategy through the LinkedIn newsletter Caribbean Boardroom Perspectives.

About Dawgen Global