Financial Services Regulation

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Unravelled: FSI outcomes – what will happen and when?

8 December 2015

Written by Senior Regulatory Counsel Michael Mathieson

Are you interested in the financial system and how it is regulated? And do you like tables (the kind with rows and columns, this is not about your furniture preferences)? If you answered 'yes' to both questions, you should read on.

I don't know about you, but I do like a good table. Not an excel spreadsheet, mind. But a good table certainly helps my simple brain to assimilate complex information. I have a colleague who disdains tables but, to resort to cliché, we have agreed to disagree.

While the final report of the Financial System Inquiry was surprisingly brief, and while the Government's response resembled, at times, a secondary school social sciences handout, it can still be hard to work out where, exactly, things are heading.

So here is a table which sets out what is likely to happen and when.

When Area Action
To date Resilience APRA has released an international capital comparison study.
" " Resilience APRA has announced an increase in mortgage risk weights for the larger banks.
" " Innovation Legislation has been passed to extend the period before unclaimed monies in the banking and insurance sectors are captured from three to seven years.
By end-2015 Resilience Develop legislation to facilitate participation of Australian entities in international derivative markets and better protect client monies.
" " Superannuation Develop legislation to improve governance and transparency in superannuation.
" " Superannuation Progress the Retirement Income Streams Review.
" " Superannuation 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.
" " Innovation Consult on legislation to support crowd-sourced equity funding.
" " Innovation Consult on crowd-sourced debt financing.
" " Innovation Task the Productivity Commission to review access to and the use of data.
" " Consumer Outcomes Develop measures to address the misalignment of incentives in life insurance.
" " Regulatory System Complete a capability review of ASIC.
" " Regulatory System Complete consultation on industry funding arrangements for regulatory activities undertaken by ASIC.
" " Regulatory System Appoint new members and revise the Terms of Reference of the Financial Sector Advisory Council.
By mid-2016 Resilience Consult on measures to ensure financial regulators have the tools they need to manage any future financial crisis.
" " Innovation Develop legislation to ban excessive card surcharges and better protect consumers using electronic payment systems.
" " Innovation Develop legislation to reduce disclosure requirements for issuers of 'simple' corporate bonds.
" " Innovation Establish the Innovation Collaboration Committee.
" " Consumer Outcomes Develop legislation which provides a professional standards framework for financial advisers.
" " Consumer Outcomes Consult on development of 'accountabilities' for issuers and distributors of financial products and ASIC product intervention powers.
" " Regulatory System Update the Statement of Expectations for APRA, ASIC and the Payments System Board.
" " Regulatory System Consider ASIC capability review and, as appropriate, develop legislation to enhance operational capabilities of regulators.
By end-2016 Resilience APRA to take additional steps to ensure the banks have unquestionably strong capital ratios.
" " Superannuation Develop and introduce legislation to enshrine the objective of the superannuation system.
" " Superannuation Consult on legislation to facilitate trustees of superannuation funds providing pre-selected comprehensive income products for retirement.
" " Innovation   Give legal effect to the Asian Region Funds Passport initiative.
" " Innovation Consider technology neutrality in financial sector regulation.
" " Consumer Outcomes Develop legislation to give ASIC the power to ban individuals from managing financial firms.
" " Consumer Outcomes Consult on strengthening ASIC's enforcement tools in relation to the financial services and credit licensing regimes.
" " Consumer Outcomes ASIC to review remuneration arrangements in the mortgage broking industry.
" " Regulatory System Introduce competition into ASIC's mandate.
Beyond 2016 Resilience APRA to ensure our banks have appropriate total loss-absorbing capacity and leverage ratios in place.
" " Superannuation Implement legislation to introduce director penalties.
" " Superannuation Consult on legislation to improve member engagement, consistent with the recommendations in the Inquiry.
" " Superannuation Monitor leverage and risk within the superannuation system.
" " Innovation Facilitate rationalisation of life insurance and managed investment scheme legacy products.
" " Consumer Outcomes Consult on and develop legislation to enable innovative disclosure for financial products and to improve the regulation of managed investment schemes.
" " Consumer Outcomes ASIC to review stockbroking remuneration arrangements.
" " Regulatory System Commence a review of ASIC's enforcement regime.
" " Regulatory System Task the Productivity Commission to review the state of competition in the financial system.

Other articles in this edition of Unravelled

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Product rationalisation – again
The FSI report recommended that the Government facilitate rationalisation of legacy products in the life insurance and managed investment scheme industries. The need for ways to close legacy products has been kicking around for at least a decade and, in 2007, Treasury released a very thorough options paper covering product rationalisation in the managed funds sector. Treasury said that sector was represented by life insurance, managed investment schemes and superannuation. Read more>>

Government launches innovation agenda – now wait for the ideas boom
You might be getting tired of all of the talk about 'innovation', and keen to see some of it actually happen. The Government's recent announcements could help, but there is a long way to go before the 'mining boom' becomes the 'ideas boom'. Read more>>

The beginning of the end of the unit trust's monopoly? A look at common contractual funds
The Board of Taxation's report on tax arrangements applying to collective investment vehicles considers that offshore investors are dissuaded from investing in Australian funds because they do not understand unit trusts, and that access to a broader range of collective investment vehicles would help Australian fund managers to compete for capital with their offshore counterparts. The Board of Taxation advocates extending tax neutrality to three additional collective investment vehicles. In the final of our series investigating these vehicles, we look at common contractual funds, which may be unfamiliar to many in the Australian market. Read more>>

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