The Australian Experience Financial Market Convergence – Implications for Regulators and...

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The Australian Experience Financial Market Convergence – Implications for Regulators and Regulatory Structures Regulatory and Supervisory Issues in Private Pensions and Life Insurance Craig Thorburn Cthorburn @worldbank.org +1 (202) 473 4932

Transcript of The Australian Experience Financial Market Convergence – Implications for Regulators and...

Page 1: The Australian Experience Financial Market Convergence – Implications for Regulators and Regulatory Structures Regulatory and Supervisory Issues in Private.

The Australian Experience

Financial Market Convergence –Implications for Regulators and Regulatory Structures

Regulatory and Supervisory Issues in Private Pensions and Life Insurance

Craig Thorburn

[email protected]

+1 (202) 473 4932

Page 2: The Australian Experience Financial Market Convergence – Implications for Regulators and Regulatory Structures Regulatory and Supervisory Issues in Private.

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

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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

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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

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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

Page 6: The Australian Experience Financial Market Convergence – Implications for Regulators and Regulatory Structures Regulatory and Supervisory Issues in Private.

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

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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”

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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

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The Environment Changes

• Responding to failures and losses in superannuation and non life insurance– “the need for more effective supervision

to meet community expectations”

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