The Australian Experience Financial Market Convergence – Implications for Regulators and...
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Transcript of The Australian Experience Financial Market Convergence – Implications for Regulators and...
The Australian Experience
Financial Market Convergence –Implications for Regulators and Regulatory Structures
Regulatory and Supervisory Issues in Private Pensions and Life Insurance
Craig Thorburn
+1 (202) 473 4932
Brief Overview of Recent History
• Regulatory Reform introduced after extensive inquiry
• New Structure of Regulatory Bodies
• New Structure within APRA
• New Regulations and Supervisory Approaches
History
• 1996 - New Government elected with policy for a Financial System Inquiry, and visionary statements about making Australia a Financial Centre in the Asia Pacific Region
• March 1997 “Wallis” Inquiry reports
Functional versus Institutional Approaches
Banks and other deposit takers
Life and non life Insurers
Pension Schemes
Anti Competitive Behaviour
Market misconduct
Asymmetric information
Systemic instability
Australian functional approach highlights enormous need for communication and co-ordination
ASIC (and ACCC)
RBA
ASIC
APRA
Organisational Change
• July 1998 – APRA formed, ASIC takes over market conduct
• July 1999 – APRA adds state based regulators
• August 1999 – APRA’s new structure commences
A ‘purpose oriented’ structure
Policy Research and Consulting Corporate Services Diversified Institutions Specialised Institutions
CEO(also a Board Member)
Board
• No industry oriented divisions or staffing groups
• Cross divisional teams seen as temporary and supplementary
Key Challenges
• Relocation• Making the new structure work• Inventing common processes• Moving toward common legislation and
prudential standards• Developing consistency of approach
– “our prime objective is to supervise similar risks in similar ways, regardless of where they occur” as this will lead to a more competitively neutral system and therefore a more efficient one”
Responding to the Expectation of Consolidated Supervision
• Widespread industry expectation that there would be capital relief has dissipated
• Industry given a standard on supervision that did not lead to any material market change
• ELE concept introduced (as a ‘concession’) but no relief there either
The Environment Changes
• Responding to failures and losses in superannuation and non life insurance– “the need for more effective supervision
to meet community expectations”