Summarise and paraphrase:

Question

The Twin Peaks Model has numerous advantages, making it highly favoured as a regulatory
model. One of these advantages is in the structure of the model. The two peaks each have their
own distinct mandates and objectives, to which each regulator is astutely dedicated (Wymeersch, 2007). Another advantage would be the reduced risk in regulation, pertaining to
prudential regulation, which serves one of the most dominant key features of this model.
Wymeersch (2007) further showed how regulatory culture, comprises of many aspects such as
policies, attitudes and actions utilised by regulators to meet their mandates effectively. This
prevents diversified cultures under one stream, avoiding conflict.
The third advantage is the flexibility of the model to be adapted it the current environment of
intricate financial conglomerates and markets. This is well illustrated in the way the
Netherlands have adapted the model to suit their specific needs. The last advantage is the ability
of the model to overcome disputes that may arise in a unified regulatory model, as explained
by Godwin et al. (2017).
The evidence of the recent financial crisis suggests that mixing functions can contribute
to a lack of focus on rising macro-prudential risk and difficulties in moving to a ‘war
footing’ when that risk becomes substantial. In addition, the incentives are different.
For example, consumer protection can be well served by keeping a bank open, while
stability is well served by closing it (JCFSB, 2010).

Answer 1

The Twin Peaks Model is favored for several reasons, primarily due to its structural advantages. Each of the two regulatory bodies within the model has clear and separate objectives, allowing them to focus effectively on their specific mandates (Wymeersch, 2007). This model also minimizes regulatory risks, particularly in terms of prudential regulation, which is a central feature. Furthermore, the concept of regulatory culture plays a significant role, encompassing the policies, attitudes, and actions that regulators employ to fulfill their roles, thereby preventing potential conflicts arising from diverse regulatory approaches.

Another strength of the Twin Peaks Model is its adaptability to the complexities of modern financial conglomerates and markets, as seen in how the Netherlands tailored the model to meet its unique requirements. Additionally, it helps resolve conflicts that may occur in a single regulatory framework, as noted by Godwin et al. (2017).

Moreover, lessons from the recent financial crisis highlight the drawbacks of merging regulatory functions, which can lead to a diminished focus on macro-prudential risks and create challenges in responding effectively when those risks escalate. The conflicting incentives are also notable; for example, keeping a bank operational might serve consumer protection but could compromise overall financial stability (JCFSB, 2010).