The Treasurer has released the Review of the Outcomes of the Financial System Inquiry 1997 by the Financial Sector Advisory Council (FSAC).
FSAC conducted a detailed evaluation of the financial sector reforms flowing from the Financial System Inquiry (which were announced on 2 September 1997) five years after their commencement.
FSAC has compared the Wallis intended outcomes with the actual present positions to provide both a qualitative and quantitative report.
Key quotes include:
“The reputation of the RBA needs to be preserved to ensure its credibility and to maintain its distance from industry. Its involvement at the margin in consumer issues (for example, in setting interchange fees) is considered potentially too operational and could appropriately be vested in the Australian Competition and Consumer Commission (ACCC). The RBA should focus on its systemic stability functions.
In terms of the role of APRA, there is a need to ensure an appropriate balance between safety and efficiency is struck. The regulatory framework must effectively manage failure, and allow failure to occur, in order to achieve greater efficiency. This may require further guidance to be provided by Government to APRA and other regulators. Financial Sector Advisory Council (FSAC) will continue to monitor and review this situation and will advise government if it considers that the balance requires adjustment.
The overlapping consumer protection roles between Australian Securities and Investments Commission (ASIC) and APRA and between ASIC and the ACCC have been a source of confusion to industry. Recent regulatory changes, while underlining the primary role of ASIC for consumer protection in the financial system, may have led to the roles of the other agencies becoming superseded to some extent. This issue requires further clarification.
The specific role of the ACCC in the financial sector was perhaps not sufficiently examined by Wallis. This issue could also be considered in greater detail in continuing to define the role of the other regulators.
Overall, the Council considers it is necessary to largely ‘hold the line’ on regulatory intensity and to ensure that there is an appropriate period of stabilisation and bedding down to consolidate the gains.”
“The Council has noted that in general, the regulators (APRA and ASIC) have tended to operate independently, whereby they seek consistency in regulatory approach across products for which they are responsible but do not always effectively deal with consistency between products that span the regulators. Some of these issues were discussed under the section dealing with the role of the regulators.”