Anonymous
Anonymous asked in Social ScienceEconomics · 1 decade ago

How the financial markets in Australia are regulated by Reserve Bank and Australian Prudential Regulation?

Update:

pliz anyone help me explain this.. it's for my exam on 28th

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  • 1 decade ago
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    1. Oversight of the financial regulators in Australia is minimal but its importance is recognised. Broadly speaking, financial regulation is divided between four agencies, which have discrete responsibilities to achieve the regulatory objectives outlined below. They are:

    * the Reserve Bank of Australia ("RBA"), charged with ensuring system stability;

    * the Australian Prudential Regulation Authority ("APRA"), which develops and enforces prudential standards to reduce the risk of institutional failure in the banking and insurance sectors;

    * the Australian Securities and Investments Commission ("ASIC"), which among other things, promotes disclosure, governance standards and consumer protection in relation to financial products; and

    * the Australian Competition and Consumer Commission ("ACCC"), which promotes competition in the financial services sector (as part of its wider brief to regulate competition).

    Senior representatives of the RBA, APRA, ASIC and the Federal Treasury also comprise the Council of Financial Regulators, whose charter is to "facilitate co-operation and collaboration" between the RBA, APRA, ASIC and Treasury to "contribute to the efficiency and effectiveness of regulation and to promote stability of the Australian financial system." The Council also has the aim of "harmonising regulatory and reporting requirements, paying close attention to the need to keep regulatory costs to a minimum." Although not a body which "regulates" those regulators, it provides a forum to help them work effectively.

    All of the RBA, APRA, ASIC and the ACCC are independent, largely autonomous statutory authorities. As such, they are not overseen by a government department or another entity charged with their supervision. Both the RBA and APRA are managed by boards comprising ex-officio and independent non-executive directors or governors appointed by the Treasurer, while ASIC and the ACCC are governed by executive commissioners who also have day-to-day responsibility for its operations. The directors and commissioners have security of tenure, and senior personnel face regular scrutiny by parliamentary committees and are bound by statute to act properly. Nonetheless, there is little direct supervision of the regulators' activities.

    Oversight, the Wallis Inquiry and the role of Treasury

    The current structure of financial regulation in Australia is based on the recommendations of the federal government's Financial System Inquiry (known as the Wallis Inquiry after its chairman), which reported in 1997 and which were implemented through the late 1990s. Although it considered how regulators should be overseen in the context of advocating significant reform of the financial regulatory framework, the Wallis Inquiry recommended against specific measures to introduce greater supervision of those bodies. Instead, it recommended that regulatory agencies should improve their internal and external reporting processes and report annually to Parliament. Having noted that financial regulators were subject to oversight by:

    * the Auditor General, who has wide powers to conduct periodic audits and investigations;

    * the Parliament, particularly through standing committees and parliamentary inquiries;

    * the Treasurer, who consults widely and has the advice of the Treasury; and

    * independent analysts who periodically produce reports or commentary on the operation of regulatory agencies,

    the Wallis Inquiry concluded that "current methods of external review will be enhanced through additional public reporting by the financial regulatory agencies… Against this background, the Inquiry considers it unnecessary to establish an additional standing body for the sake of external review of the efficiency of the financial regulatory agencies." It did, however, recommend the creation of a Financial Sector Advisory Council, comprising industry experts, to give policy advice to the Treasurer from an industry perspective in addition to the advice being provided by Treasury.

    Regulatory failure and the collapse of HIH Insurance

    One of the most far-reaching investigations into the conduct of a regulator in Australia was undertaken as part of the Royal Commission chaired by Justice Owen into the collapse of the HIH insurance group. HIH was one of the country's largest insurers and its failure was the largest collapse in Australian corporate history. Justice Owen, who reported in April 2003, inquired into the reasons for and the circumstances surrounding its collapse in March 2001. As well as identifying individuals and organisations which contributed to the failure, he was directed to enquire into the "adequacy and appropriateness of arrangements for the regulation and prudential supervision of general insurance," particularly in light of the reforms following the Wallis Inquiry.

    Justice Owen found that

    "There was no evidence that APRA contributed to, or could have acted

    Source(s): yahoo serach
  • 5 years ago

    You can call me a "Republican," if we are going based on their stated economic opinions. Not their actions, nor their social policies. I'm a libertarian so... I do line up with "Republican," views on the economy. Reasons against regulation: The biggest one is unintended consequences. We have absolutely no idea what this regulation will cause in the future, good or bad. I also don't see that this is a bad thing to the people with the money (Investors). Personally, it provides a safety net for people. Even though the companies are broken up, the stock brokers and investors won't take any hits, which is where the hit needs to be felt. Also, we don't have any clue what the long term effects could be. We saw that the FDR banking regulations made competition impossible by reducing a banks practices to a few basic principles. This meant that the big got bigger (Safely) and the small smaller. No competition. No improvement. Another example is the Clinton regulations under the clout of Affirmative Action. He passed several regulations that would create a quota for the amount of loans that banks would have to provide to poor minorities in comparison to their white counterparts. What we ended up seeing is that the people in question couldn't actually afford the loans in question. When gas prices went up (Middle East Conflicts) and food prices rose (Ethanol Invention lowered supply, increased prices). They could no longer afford their loans and we saw the collapse of the sub-prime mortgage industry. The cruel irony here is that it was the minorities who were supposed to be helped who were the hardest hit. Without regulation, banks may fail, companies may fail. But those practices will fail with them. Who would be stupid enough to repeat those mistakes knowing that they've failed in the past? The other thing is that fraud and other crimes need to be enforced more regularly. Just because Goldman-Sachs participated in illegal activities does not mean that we need more regulation to hold them down. Lets prosecute them for fraud and get as much of the money back as possible. Has anybody heard of a successful ponzy scheme since Madoff was put away for life? Nope. Has their been any new regulation? Nope.

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    6 years ago

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