The Government's response to the Financial System Inquiry's Final Report was released today. Along with responses to each recommendation, it includes specific measures which the Government plans to implement before the election and beyond. Those measures include:
To date: The Australian Prudential Regulation Authority (APRA) released an international capital comparison study on 13 July 2015.
On 20 July 2015 APRA announced an increase to mortgage risk weights for our larger banks which will improve the resilience of the banking system to crises and promote competition. The major banks have subsequently undertaken capital raisings to increase their capital ratios.
By end-2015: Develop legislation to facilitate participation of Australian entities in international derivative markets and better protect client monies.
By mid-2016: Consult on measures to ensure financial regulators have the tools they need to manage any future financial crisis.
By end-2016: APRA to take additional steps to ensure our banks have unquestionably strong capital ratios.
Beyond 2016: APRA to ensure our banks have appropriate total loss-absorbing capacity and leverage ratios in place.
By end-2015: Develop legislation to improve governance and transparency in superannuation. Progress the Retirement Income Streams Review. Task the Productivity Commission to immediately develop and release criteria to assess the efficiency and competitiveness of the superannuation system and to develop alternative models for a formal competitive process for allocating default fund members to products.
By end-2016: Develop and introduce legislation to enshrine the objective of the superannuation system. Consult on legislation to facilitate trustees of superannuation funds providing pre-selected comprehensive income products for retirement.
Beyond 2016: Implement legislation to introduce director penalties. Consult on legislation to improve member engagement, consistent with the recommendations in the Inquiry. Monitor leverage and risk within the superannuation system.
To date: Passed legislation to extend the period before unclaimed banking monies in the banking and insurance sector are captured from three to seven years.
By end-2015: Consult on legislation to support crowd-sourced equity funding. Consult on crowd-sourced debt financing. Task the Productivity Commission to review access to and the use of data.
By mid-2016: Develop legislation to ban excessive card surcharges and better protect consumers using electronic payment systems. Develop legislation to reduce disclosure requirements for issuers of ‘simple’ corporate bonds. Establish the Innovation Collaboration Committee.
By end-2016: Give legal effect to the Asian Region Funds Passport initiative. Consider technology neutrality in financial sector regulation.
Beyond 2016: Facilitate rationalisation of life insurance and managed investment scheme legacy products.
By end-2015: Develop measures to address the misalignment of incentives in life insurance.
By mid-2016: Develop legislation which provides a professional standards framework for financial advisers. Consult on development of accountabilities for issuers and distributors of financial products and ASIC product intervention powers.
By end-2016: Develop legislation to give ASIC the power to ban individuals from managing financial firms. Consult on strengthening ASIC’s enforcement tools in relation to the financial services and credit licensing regimes. ASIC will review remuneration arrangements in the mortgage broking industry.
Beyond 2016: Consult on and develop legislation to enable innovative disclosure for financial products and to improve the regulation of managed investment schemes. ASIC will review stockbroking remuneration arrangements.
By end-2015: Complete a capability review of ASIC. Complete consultation on industry funding arrangements for regulatory activities undertaken by ASIC. Appoint new members and revise the Terms of Reference of the Financial Sector Advisory Council.
By mid-2016: Update the Statement of Expectations for APRA, ASIC and the Payments System Board to provide additional guidance about the Government’s expectations for their strategic direction and performance and improve regulator accountability. Consider ASIC capability review and, as appropriate, develop legislation to enhance operational capabilities of regulators.
By end-2016: Introduce competition into ASIC’s mandate.
Beyond 2016: Commence a review of ASIC’s enforcement regime. Task the Productivity Commission to review the state of competition in the financial system.