7: Regulatory architecture

Australia’s current regulatory model has served us well. The global financial crisis (GFC) tested regulatory arrangements globally and domestically, and Australia’s twin peaks model has proven robust and effective. A number of overseas jurisdictions have looked to aspects of Australia’s model to address weaknesses the GFC exposed in their financial systems.

Submissions have not called for significant change to Australia’s regulatory framework. However, both submissions and stakeholder consultations yielded a wide range of suggestions for improving the existing architecture. Based on these views, the Inquiry proposes policy options for consideration and further feedback.

The Inquiry has commissioned work on the costs and benefits of the extent of regulation in the financial system and seeks further evidence in this regard.

The Inquiry also notes that, concurrent with the preparation of this report, the Senate has been examining the performance of the Australian Securities and Investments Commission. The Senate Committee’s Report contained a large number of recommendations that are of relevance to the work of this Inquiry. The Senate Report was issued at the time the Interim Report was being finalised for printing. The findings of the Senate Report will be carefully examined by this Inquiry in the lead-up to its Final Report.

Based on evidence to date, the Inquiry observes:

  • The regulatory perimeters could be re-examined in a number of areas to ensure each is targeted appropriately and can capture emerging risks.
  • Australia generally has strong, well-regarded regulators, but some areas of improvement have been identified to increase independence and accountability.
  • During the GFC and beyond, Australia’s regulatory coordination mechanisms have been strong, although there may be room to enhance transparency.
  • Regulators’ mandates and powers are generally well defined and clear; however, more could be done to emphasise competition matters. In addition, ASIC has a broad mandate, and the civil and administrative penalties available to it are comparatively low in relation to comparable peers internationally.
  • To be able to perform their roles effectively in accordance with their legislative mandate, regulators need to be able to attract and retain suitably skilled and experienced staff.