FINANCIAL SYSTEM INQUIRY HUNGRY FOR FACTS
The Chairman of the Financial System Inquiry, Mr Stan Wallis, today issued a reminder that submissions to the Inquiry are due by Monday 9 September 1996.
The Treasurer has asked the Inquiry to undertake a stocktake of the results of financial deregulation since the early 1980's, analyse the forces driving further change, and make recommendations on future regulatory arrangements.
Mr Wallis said, "I want to stress that the Inquiry has a number of complex issues to consider, and that it has no fixed or predetermined views on any of them."
"For example, we want to determine:
- the impact of emerging payment and communications technology, and how to ensure it benefits consumers;
- what changes to the existing system of prudential regulation are justified, eg whether all aspects of prudential regulation of institutions should be brought under a single regulator, or whether the current system of multiple regulators should be retained;
- how to improve the environment for raising funds, especially for small businesses;
- what specific areas of the financial system bear unnecessary costs because of overlapping and inconsistent regulation; and
- generally, how to improve the efficiency of the financial system for all users."
"We want to base any recommendations we make on an analysis of factual or empirical evidence relevant to the issue. Facts are far more persuasive than mere assertions or tallies of who wants what."
Mr Wallis said, "The Inquiry is very keen to receive submissions from all interested parties. We have already received over 20 submissions to date, mostly from individual members of the public or small business people who use the financial system."
Submissions will be released to the public as soon as possible after the closing date, 9 September.
The Inquiry will be considering submissions before issuing a Discussion Paper around the end of November this year. The final report of the Inquiry is due on 31 March 1997.
"The Inquiry is especially concerned to ensure that the regulatory framework encourages innovation, but at the same time protects the legitimate interests of consumers. For example, in the investment advice arena advances in communications technology, which enable the direct promotion of investment products to a global market via the Internet, suggest that the industry may undergo significant change and that existing regulatory approaches may need to adapt. We would like to know what evidence is available about the likely penetration of off-shore suppliers of advice and products into the Australian market, the likely take-up rate and the impact on consumers."
"The Inquiry has observed that the traditional boundaries between the products offered by different financial institutions appear to be dissolving. In the home loan market, for example, banks, building societies, insurance companies and other financial institutions are now vigorously competing with each other and with new service providers. Competitors to traditional institutions are emerging in other areas, such as the involvement of software and communications companies in aspects of the payments system, and the development of Smartcards as a substitute for cash. The Inquiry is particularly interested in the current and likely impact of these developments on the business of financial institutions, and on the system of prudential regulation."
"In relation to banking and insurance, since 1988 there has been a policy of refusing to allow mergers between any of the major banks or life offices. Some argue that this "six pillars" policy is no longer justified on national interest grounds and that normal competition policy rules should apply. This is a complex issue which requires careful analysis."
"The Treasurer has also asked the Inquiry to examine closely Commonwealth legislation affecting the financial system in terms of its costs and benefits. This aspect of the Inquiry is part of the Commonwealth's response to the agreement of the Council of Australian Governments in April 1995 to reform all existing legislation by the year 2000."
"We want to hear whether there are any aspects of the existing regulatory framework which unduly inhibit competition or impose unnecessary costs. Some argue that Australia's financial system is subjected to overlapping and conflicting regulation in various areas. The Inquiry would like to know, in detail, what those areas are, the costs of compliance, and what alternatives are available."
Mr Wallis reiterated the Inquiry's commitment to delivering a final report by 31 March 1997. "We have been set a tight deadline which we are determined to meet, " he said. "For that reason, it is essential that anyone who wants to have input to the Inquiry's deliberations do so as soon as possible, and certainly by 9 September 1996."
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