Impediments to financial integration

Preliminary assessment

Observation

Although elements of Australia’s financial system are internationally integrated, a number of potential impediments have been identified. Financial system developments in the region will require continuing Government engagement to facilitate integration with Asia.

Impediments to financial integration

This Inquiry has the benefit of following a number of Government inquiries and private sector reviews that have put forward proposals to promote integration. The most recent Australian Government report in 2012, Australia in the Asian Century White Paper,27 recommended that Australia develops the skills needed to ensure businesses can take advantage of changes in our region.

The 2009 Johnson report28 examined opportunities to increase both foreign participation in Australian markets and financial services exports, especially to the growing Asian region. The report concluded the main opportunities for Australian businesses were:

  • Australian fund managers managing more offshore-sourced funds
  • Banks doing more transactional banking business in the region
  • Financial institutions managing offshore business from Australia, rather than overseas

Also, globally published indices are regularly released comparing various national attributes, including ‘competitiveness’. Australia is generally ranked highly for liveability, strong rule of law, financial market sophistication, lack of corruption and overall economic environment.29 However, Australia is typically ranked lower on the overall burden of regulation and business focus of regulators.30

The elements in these reports and other studies provide useful indicators of the critical factors for successful financial system integration:

  • Deep and globally integrated financial markets.
  • Strong business environment and well-developed infrastructure.
  • Regulators with a global perspective and an understanding of global businesses.31

Some submissions note impediments in the business environment that hamper those factors, or where more Government engagement may be required to achieve them.

Taxation

Submissions suggest that some tax settings in Australia distort international financial flows. Many of these issues have been raised before as part of the Johnson, Australia’s Future Tax System and Board of Tax reviews. Table 10.2 below outlines some tax issues, the recommendations from prior reviews and their current status, as understood by the Inquiry.

To the extent that the changes are not being currently progressed, the Inquiry will refer these items to be considered by Australia’s Tax White Paper.

Table 10.2: Financial integration tax issues raised in submissions
Tax issue Explanation Past review recommendations Status
Interest withholding tax (IWT) Submissions argue IWT distorts the funding decisions of financial institutions and places Australia at a competitive disadvantage internationally. Johnson reco. 3.4: remove IWT.
AFTS reco. 33: financial institutions operating in Australia should generally not be subject to IWT on interest paid to non-residents.
Government announced in 2013–14 Mid-year Economic and Fiscal Outlook (MYEFO) not proceeding with IWT removal.32
London interbank offered rate (LIBOR) cap for IWT Caps deductibility in respect of interest paid by an Australian branch to a foreign head office to the applicable LIBOR. Submissions argue LIBOR does not reflect the true cost of raising funds. Johnson reco. 3.5: remove the LIBOR cap on deductibility of interest paid on branch-parent funding.
Considered by the Board of Tax as part of its review of tax arrangements applying to permanent establishments.
The Board of Tax report is yet to be released.
IWT for counterparties (CCPs) Submissions argue that Australia is at a competitive disadvantage globally as one of the only countries that applies IWT for CCPs. Treasury released a discussion paper outlining the issues involved in mandatory central clearing in late February 2014. This paper mentioned IWT issues.
Package of reforms aimed at facilitating managed funds Submissions note the limitations of the current regime and support extending tax flow through treatment to collective investment vehicles (CIVs) other than managed investment trusts (MITs). Johnson reco. 3.3: recommended the Treasurer request the Board of Tax to review the scope for providing a broader range of tax flow through CIVs.
Board of Tax completed a review into CIVs in December 2011.
The Board of Tax report is yet to be released
Introduce an Investment Manager Regime (IMR) to provide clear and certain tax treatment for transactions undertaken by foreign residents using Australian intermediaries Johnson reco. 3.1: Introduce an IMR. Elements 1 and 2 of the IMR have been legislated. Consultation with industry stakeholders is continuing on Element 3.
New tax system for MITs Board of Tax review of the tax arrangements applying to MITs. Government announced start date of 1 July 2015.
Some elements of the new tax system have been legislated since the release of the Board’s report.
Offshore Banking Unit (OBU) Submissions seek Government support for OBU regime and clarification of rules. Johnson reco. 3.2: Remove tax uncertainty about what constitutes an offshore transaction and move some provisions from legislation to regulation. Government announced start date of 1 July 2015
Islamic financing Clarify tax treatment of Islamic financing. Johnson reco. 3.6: recommended Board of Tax review.
Board of Tax review completed in 2011.
The Board of Tax report is yet to be released

Other impediments

Submissions identify other impediments to integration in the following areas:

  • Ownership restrictions, particularly in relation to banking and financial market infrastructure.
  • Costs and requirements associated with licensing and ongoing compliance costs being barriers to foreign entrants.
  • Aspects of prudential settings in Australia having a negative impact on international competitiveness.
  • Aspects of prudential setting in Australia and its inconsistency with supporting international expansion, such as the way equity investments in offshore financial services businesses are treated for capital purposes.
  • Firms with transnational operations having difficulties in relation to cross-border information flows. For example, regulatory settings can impose requirements for record keeping that restrict data sharing across branches of the same financial institution located in different jurisdictions, acting as an impediment to cross-border activity.
  • Australia’s trust law needing greater codification to promote better understanding globally of our regulatory structure in a number of private wealth, debt and equity products.
  • Lack of access to some international concessional treatments and quotas for investment that would be useful to Australian financial services businesses, such as access to China’s RQFII program.
  • Anomalies between governance requirements in Australia and some offshore jurisdictions that may place our companies at a competitive disadvantage.

Addressing many of these issues involves trade-offs with other policy objectives.

Although economic theory suggests that international capital flows can boost growth, be a source of resilience for individual economies and provide financial stability benefits, they also make financial conditions more correlated across jurisdictions and create channels for contagion.33

The Inquiry supports efforts to drive greater financial integration with the rest of the world, provided it is not at the cost of appropriate standards for financial stability and conduct in Australia. The Inquiry supports removing market and other impediments; enhancing mutual recognition and equivalence processes; and continuing efforts to support Australian regulators to participate in international standard-setting bodies, with a view to advancing Australia’s national interest.

The Inquiry does not support tax subsidies or concessions, or market intervention to enhance financial integration.

In considering any recommendations for removing particular impediments in the final report, the Inquiry seeks more detail from stakeholders, particularly on the relative importance of these potential impediments and how changes balance with other policy objectives. Other issues relating to cross-border transactions are discussed in the Technology chapter.

Government engagement – Asia

Although the Inquiry’s approach is focused on reducing impediments, proactive Government action will also be required. The region’s financial system is already highly regulated and foreign governments are initiating significant changes. Government-to-government dialogue will be needed and industry integration efforts will continue to require Government support.

Although the following discussion focuses on the changes forecast in China, it illustrates the intensity of Government involvement required to ensure access, a smooth transition and risk mitigation for Australia to play an increasing role in the region.

Asia’s largest anticipated financial system development will be the liberalisation of China’s capital account, and the gradual easing of restrictions on trading in the onshore Chinese currency market by firms from outside China.34

China has set a program for further relaxing currency and capital controls. HSBC forecasts that a third of China’s total trade will be settled in RMB by 2015, making RMB one of the top three trade settlement currencies by volume.35 As China continues to free up capital controls, a significant proportion of the resultant increase in both portfolio and direct investment flows is likely to be in Asia.36 To date, the level of Government involvement has been significant to ensure that, if commercial and market factors support increased industry activity with China, the Australian financial system’s capacity and infrastructure is capable of supporting that interaction.

Coordination and raising awareness

Government capacity building includes efforts to raise awareness of these forecast changes. One of various initiatives is the Australia-Hong Kong RMB Trade and Investment Dialogue — a private sector–led forum facilitated by the Australian Treasury, Reserve Bank of Australia (RBA) and Hong Kong Monetary Authority. The dialogue gives Australian and Hong Kong banks and corporates a forum to discuss the benefits and challenges associated with RMB trade and investment.

Discussions held in Sydney in 2013 and Hong Kong in 2014 were informed by the results of two surveys of corporate attitudes towards RMB trade settlement and investment, conducted by the RBA in 2013 and expanded on by the Centre for International Finance and Regulation in 2014.37

Following the 2014 Dialogue, the Group announced its objectives as being to:

  • Educate Australian corporates on the risks and rewards arising from RMB trade and capital flows
  • Support initiatives to understand better the products and services needed to grow the RMB market in Australia
  • Encourage deeper levels of engagement and links between the financial markets in Australia and Hong Kong to better serve the wider Asian market, especially through developing critical infrastructure to support settlement, clearing, liquidity and pricing of RMB
  • Actively collaborate with the Australian and Hong Kong funds and asset management sectors in these efforts38
Facilitating financial system architecture

In addition to ongoing engagement with the private sector, the Government and regulators have also taken — or are in the process of taking — a number of steps to facilitate the development of the RMB market in Australia. These include:

  • Establishing a bilateral local currency swap agreement between the People’s Bank of China and the RBA in March 2012. The agreement is designed to provide market participants with greater confidence regarding the availability of RMB liquidity in Australia, particularly during times of stressed market conditions.
  • Introducing direct trading between the Australian dollar and the Chinese RMB — that is, trading between these two currencies without using an intermediate third currency — in the onshore foreign exchange market in April 2013. In time, this is expected to facilitate greater local currency trade invoicing between Australia and China.
  • The RBA investing around 3 per cent of its foreign currency reserves in the Chinese sovereign bond market.
  • The RBA and People’s Bank of China developing future RMB clearing and settlement arrangements in Sydney.39 An ‘official’ RMB clearing bank in Australia would be given direct access to the Mainland Chinese foreign exchange and RMB interbank markets to facilitate cross-border trade transactions.

Given the anticipated development in Asian financial markets in coming decades, and the strength and significance of Australia’s trade relationships with the region, opportunities will increasingly arise to access capital from Asia, for Australian and Asian financial services firms to expand into each other’s markets, and to grow financial services exports and imports.

While the Inquiry recognises that much of the success in enhancing financial integration will depend on commercial and market factors, Asian markets are undergoing significant structural changes, which are being shaped to a large degree by governments. Capital and foreign exchange liberalisation are government-initiated activities. Unlike some other regulatory changes, government-to-government dialogue is critical to ensure Australia has prompt access to competency building initiatives and develops appropriate financial system architecture.

The Inquiry seeks further information on the following areas:

  • What are the potential impediments to integration, particularly their relative importance, and the benefits to the broader Australian economy that can be demonstrated if they were removed?
  • Where is future Government engagement needed to facilitate integration with Asia?

Cross-border regulatory settings

Preliminary assessment

Observation

Government efforts to promote Australia’s policy interests on international standard-setting bodies have been successful. Domestic regulatory processes could be improved to better consider international standards and foreign regulation, including processes for collaboration and consultation about international standard implementation, and mutual recognition and equivalence assessment processes.

Regulatory settings are one of the most significant factors affecting the level and nature of international financial integration. Regulatory barriers create friction in financial flows across borders.

Since the GFC, the scope and complexity of cross-border regulation has increased significantly. The Australian financial system is increasingly affected by international standards and foreign regulation. This trend is expected to continue.

There are two sources of this increasing international influence:

  1. Standard setting by international setting bodies implemented domestically by Australian regulatory agencies:40 ‘international soft law’.41 In some cases, this is implemented after international inter-governmental agreements42 or may be initiated by international standard-setting bodies to promote global convergence of good practice. Implementing an international standard can result in domestic legislation, standards or guidance.
  2. Extraterritorial effect of other countries’ legislation within Australia.43 The main issues for the Australian financial system are the cost this imposes where foreign requirements are inconsistent with Australian requirements, and practical compliance implications for Australian financial services providers.

The issues discussed in this chapter mirror the dialogue occurring at an international level to improve processes for forming international standards and assessing conflicts caused by inconsistent foreign regulation.44 This chapter notes, but does not discuss further, these global issues, instead it focuses on improvements in the domestic context.

Additional issues about Australia’s regulatory environment are also discussed in the Regulatory architecture chapter.

Standard setting

Australia is well placed to be influential in the global context. As the RBA Governor recently noted, “something that is a bit new and, overall, refreshing is that Australia actually does have a place at more of the relevant tables than it used to”.45 Australia is represented at many levels, and holds leadership positions in some global standard-setting bodies (Table 10.3).

Table 10.3: Australian representation in selected international groups
Body Agency
Group of Twenty (G20)
President Australian Government (2014)
Finance Ministers and Central Bank
Governors
Reserve Bank, Treasury
Other groups CFR representatives
Financial Stability Board (FSB)
Plenary Reserve Bank, Treasury, (ASIC)
Steering Committee Reserve Bank, Treasury, (ASIC)
Standing Committee on Assessment of Vulnerabilities Reserve Bank
Regional Consultative Group for Asia Reserve Bank, Treasury,
Official Sector Steering Group (on financial benchmarks) Reserve Bank, ASIC
Other groups CFR representatives
Bank for International Settlements (BIS)
Governors Meeting Reserve Bank
Asian Consultative Council Reserve Bank
Basel Committee on Banking Supervision (BCBS) Reserve Bank, APRA
Group of Governors and Heads of Supervision Reserve Bank, APRA
Committee on Payment and Settlement Systems Reserve Bank
Other Groups CFR representatives
International Association of Insurance Supervisors (IAIS)
Executive Committee APRA
Technical Committee APRA
Financial Stability Committee APRA
Working groups APRA
International Organization of Securities Commissions (IOSCO)
Board Chair ASIC
Asia-Pacific Regional Committee ASIC
CPSS-IOSCO Steering Committee on Financial Markets Infrastructure (Co-Chair) ASIC
Assessment Committee (Chair), Capacity Building Resource Committee (Chair), IOSCO 2020 Task Force (Chair) and Cross Sectoral Taskforce on Securitisation (Co-Chair) ASIC
Task Force on Unregulated Financial Markets and Products ASIC
Task Force on Financial Market Benchmarks ASIC
Other groups ASIC
International Organisation of Pension Supervisors
Executive Committee APRA
Other groups APRA
Other International Committees
Asian region based Committees including EMEAP APRA
OECD Committees APRA
Financial Action Task Force (FATF)
President AGD (2014–15)
Plenary and working groups AUSTRAC, AGD, DFAT
Egmont Group of Financial Intelligence Units (Egmont)
Oceania representative AUSTRAC
Plenary and working groups AUSTRAC
Asia Pacific Group on Money Laundering (APG)
Co-Chair (permanent) AFP
Plenary and working groups AUSTRAC, AFP, AGD

Source: Provided by Treasury, ASIC, AUSTRAC and APRA.

Submissions support Government efforts to maintain focused international representation. They cite examples of when this representation has assisted outcomes in international standard setting, where those standards apply in the Australian context.

However, submissions also ask the Inquiry to consider changing Australia’s regulatory process to better accommodate the scale and complexity of increasing international influence on the domestic regulatory environment.

Where possible, the domestic application of international standards should be accompanied by transparency and consultation mechanisms. International standards are not always implemented with disclosure and transparency consistent to those that must be applied for domestic regulatory initiatives. For example, consultation processes required by a global standard setter might be truncated, or be inconsistent with priorities for domestic consultation on other local legislation applied to the sector affected.

Submissions request the Inquiry considers mechanisms to ensure:

  • Australian representatives on international standard setters have regard to whole-of-Government objectives when participating in international forums.This might simply mean Treasury better coordinating contributions from its agencies and ensuring policy outcomes are consistent across agencies in global forums. Some submissions suggest a revised Statement of Expectation46 might clarify that the regulator needs to have regard to broader interests when negotiating at international level.
  • Domestic stakeholders have sufficient transparency of international standard-setting agendas and, to the extent possible, are consulted before these standards are applied domestically.
  • Other good regulation principles required for Australian regulation are observed, to the extent possible, for standard-setting activities and, in particular, cost/benefit processes are followed to balance regulatory burden with regulatory benefit in the local context.

Examples of these concerns in the prudential standard-setting context are discussed in more detail in the Stability chapter. A discussion of Australia’s regulation policy develop processes is included in the Regulatory architecture chapter.

Extraterritorial effect of foreign legislation

An increasing volume of foreign regulation is imposed by other countries on Australian business, particularly in financial services. The Australian Bankers’ Association (ABA) submission cites examples of legislation emanating from the United States,47 but notes that most global financial centres apply similar legislation with some extraterritorial effect that can impact financial services businesses in Australia.

There is limited scope for our regulators to influence the implementation of foreign regulation that affects Australia. In this regard, the mutual recognition and equivalence process is an important regulatory tool to support increased financial integration. It minimises regulatory barriers to cross-border activity, while not compromising regulatory standards for financial stability and conduct in Australia.

Foreign regulation is a regulatory reality for the increasing number of Australian businesses that interact with international markets from Australia, or provide services internationally from Australia:

  • Large Australian-owned banks have increased their activity in Asia over recent years. Exposure of all Australian-owned banks to the Asian region, measured as aggregate claims, was $142 billion at September 2013, which has risen from $22 billion in 2003.48
  • Insurers are also active overseas and expanding into Asia. QBE is a global insurer with 73 per cent of its $18 billion of premium income sourced outside Australia and New Zealand.49 IAG, which has $9.4 billion in gross written premium, noted that 7 per cent of its growth came from Asia in 2012–13.50
  • A number of funds managers have significant global reach; for example, Macquarie had $US38 billion in assets under management across seven markets in Asia in March 2014.51

Around 40 per cent of Australian exporters are small businesses who require financial services to support their activities.52 Simplifying cross-border regulation is of benefit to these groups as well as larger exporters.

Divergent international and domestic legislative requirements applying to the same business process increase compliance costs, create legal risk and limit the cost efficiencies of scale businesses. Submissions pointing to this development request heightened awareness of the foreign regulation environment in domestic regulatory processes.

The submissions seek to ensure:

  • Domestic regulatory processes have regard to the volume and cost of the international regulatory environment when assessing the cost and benefits of domestic regulation.
  • Regulatory drafting of financial system requirements has regard to requirements in key regional centres to achieve harmonised legislation, where appropriate.
  • Regulatory agencies have appropriate powers to enter mutual recognition or substituted compliance arrangements to minimise the impact of cross-border regulatory frictions. These arrangements are discussed in more detail below.

Regulatory recognition arrangements

A challenge for financial services providers operating across borders is meeting the additional national regulatory requirements for each country where services are provided, or that apply in Australia from another country. Given the increasing internationalisation of business, governments around the world are increasingly taking steps to avoid unnecessary duplication, burden and conflict of regulation across borders.

Cross-border regulated activity can be facilitated by:

  • Substituted compliance — unilaterally recognising another country’s regulation
  • Mutual recognition — recognising each other’s regulation as equivalent
  • Multilateral recognition — recognising a number of countries’ regulations as equivalent and allowing ‘home’ country regulation to meet ‘host’ country requirements

These arrangements are often facilitated by governments and reduce the regulatory burden for providers seeking to access foreign markets. They have the potential to facilitate quicker market entry, reduce regulatory costs, increase competition and capital flows, and promote investor choice. Although these benefits are desirable, such arrangements must be applied in a way that protects local investors adequately, prevents financial market integrity from being compromised and addresses systemic risks. Mutual recognition and substituted compliance processes are regulatory tools that reduce regulatory frictions, while ensuring Australian regulatory standards are not weakened.

Most Australian regulators have transparent guidelines for their approach to mutual recognition and substituted compliance.53 ASIC’s general approach is to facilitate access by financial services providers from overseas regulatory regimes that are ‘sufficiently equivalent’ to the Australian regulatory regime, in terms of the degree of investor protection, market integrity and reduction of systemic risk they achieve. The factors considered are clear and transparent and have been the subject of consultation.

Under ASIC’s Principles, it can exempt financial services providers from domestic licensing. This is allowed where the financial services are overseen by an overseas regulatory authority whose regulatory regime is sufficiently equivalent to the Australian regulatory regime, with effective cooperation arrangements between the two regulators.54 For example, under this arrangement, relief has been given to wholesale service providers from the United Kingdom, United States, Singapore, Hong Kong and Germany.

A reverse example of substituted compliance was RBA’s clarification on Australia’s regulatory regime for Australian Securities Exchange (ASX) clearing services, which assisted the European Securities and Markets Authority’s recognition of Australia’s regulatory regime as equivalent — a necessary pre-condition for ASX to continue to offer clearing services to European Union banks.55

Mutual recognition has been applied between Australia and New Zealand on trans-Tasman mutual recognition of securities offerings. The regime allows issuers from either country to offer securities, including shares and debentures, or interests in managed investment schemes in the other country, using their home prospectus or Product Disclosure Statement, without complying with most of the substantive requirements of the host jurisdiction.

This arrangement has improved time to market and reduced legal and documentation costs for some issuers by 55 to 95 per cent. From 30 June 2008 to 15 March 2013, the number of offers made under the regime was 66 New Zealand offers to Australia and 834 Australian offers to New Zealand.56

Submissions note that as the volume of international regulation increases, processes that allow timely, comprehensive and effective mutual recognition and substituted compliance processes with priority jurisdictions will be of increasing importance.

Submissions seek to ensure that:

  • Government and regulatory agencies have appropriate powers to enter mutual recognition or substituted compliance arrangements
  • Government and regulatory agencies have considered when unilateral recognition is appropriate without mirror concessions for Australian businesses entering foreign jurisdictions
  • Existing mutual recognition guidance and processes are reviewed to ensure they are well positioned to facilitate industry-led approaches for regulatory assessments — particularly to promote access to Australia’s wholesale markets
  • Existing arrangements are regularly reviewed to ensure there continues to be equivalence and adequate regulatory cooperation, and that the arrangements remain appropriate
  • Current regulatory recognition arrangements receive regular stocktakes to identify priority jurisdictions and activities that might benefit from further arrangements

Funds – mutual recognition

Managed investment schemes are a significant feature of the Australian financial system landscape and throughout Asia. However, foreign investment in Australian managed investment schemes is very low. In March 2014 it was 3.4 per cent,57 while it was over 60.0 per cent in Hong Kong58 and approximately 80.0 per cent in Singapore.59

A number of submissions suggest reducing barriers to offering managed investment scheme products internationally to attract interest in Australian managed funds. Industry submissions indicate major impediments are the unique structure of the Australian managed investment scheme and the uniqueness of Australian regulation of collective investments.60

The Asian Funds Passport is being developed to address these concerns. The Passport is a mutual recognition agreement for managed investment schemes. It will allow a fund registered in its home economy to be offered in other participating countries, without different operational and licensing requirements.61 In originally recommending the Passport, the Johnson report identified the European Undertakings for the Collective Investment of Transferable Securities (UCITS) framework as an example of a successful multilateral funds passport arrangement.

The Passport is a significant first step to better integrating the funds management industry in the region. While supporting its progress, the Inquiry also notes that a number of initiatives are currently in place or in motion, designed to establish fund regulatory structures that can promote funds to be offered across borders. They include three proposals emanating from Asia, in addition to the UCITS structure recognised throughout Europe and in wide use in Asia.

Policy options for consideration

The Inquiry would value views on the costs, benefits and trade-offs of the following policy option or other alternatives:

Improve domestic regulatory process to better consider international standards and foreign regulation — including processes for transparency and consultation about international standard implementation, and mutual recognition and equivalence assessment processes.

The Inquiry seeks further information on the following areas:

  • What changes can be made to make implementing international standards more transparent and otherwise improved?
  • What improvements could be made to domestic regulatory process to have regard to foreign regulatory developments impacting Australia?
  • Are there priority jurisdictions and activities that might benefit from further mutual recognition or other arrangements? What are the identified costs and benefits that might accrue from such an arrangement?

27 Commonwealth Government 2012, Australia in the Asian Century White Paper, Commonwealth Government, Canberra, viewed 21 June 2014.

28 Australian Financial Centre Forum 2009, Australia as a Financial Centre: Building on our strengths, Commonwealth Government, Canberra, viewed on 21 June 2014.

29 Including:PriceWaterhouse Coopers (PWC) 2014, Cities of Opportunity 6, PWC, Sydney, viewed 21 June 2014, and Economist Intelligence Unit (EIU), Best cities ranking and report, The Economist, London, viewed 21 June 2014.

30 For example World Economic Forum (WEF) 2013, ‘Australia ranked 128th for burden of regulation’, Global Competiveness Report 12–13, viewed 21 June 2014.

31 City of London Corporation 2013, Local to global: Building a modern financial centre Special Interest Paper, City of London Corporation, London viewed 21 June 2014, and Menon, R 2014, Singapore’s Financial Centre in the New Landscape, Investment Management Association of Singapore 14th Annual Conference, Singapore, viewed 21 June 2014.

32 Commonwealth Government 2014, Appendix A: Policy decisions taken since the 2013–14 Budget, Commonwealth of Australia, Canberra, viewed 21 June 2014.

33 Reserve Bank of Australia (RBA) 2014, ‘Cross-border Capital Flows since the Global Financial Crisis’, RBA Bulletin, June Quarter, RBA, Sydney, viewed 21 June 2014.

34 Reserve Bank of Australia (RBA) 2013, ‘Developments in Renminbi Internationalisation’, RBA Bulletin, June Quarter, RBA, Sydney, viewed 21 June 2014.

35 HSBC 2014, Internationalising the RMB, HSBC, London, viewed 21 June 2014.

36 Centre for International Finance and Regulation (CIFR) 2014, Internationalisation of the Renminbi: Pathways, Implications and Opportunities Research Report, March, CIFR, Sydney, viewed 21 June 2014.

37 A summary of the Reserve Bank of Australia (RBA) survey is available in RBA 2013, Developments in Renminbi Internationalisation, RBA Bulletin, June Quarter, RBA, Sydney, viewed 21 June 2014.

38 Australian Bankers’ Association (ABA) 2014, Second Australia-Hong Kong RMB Trade and Investment Dialogue, media release 22 May, viewed 21 June 2014.

39 Hockey, J 2014, Deepening financial ties with China, Canberra, media release, 11 April, Canberra, viewed 21 June 2014.

40 For example, Basel Committee on Banking Supervision (BCBS) 2014, Core Principles for Effective Banking Supervision, BCBS,Switzerland,viewed 21 June 2014, and International Organization of Securities Commissions (IOSCO) 2010, Objectives and Principles of Securities Regulation, Madrid, viewed 21 June 2014.

41 Alexander, K, Dhumale, R and Eatwell, J 2006, Global Governance of Financial Systems, Oxford University Press, Oxford, pages 134–154.

42 See G20 2009, Leaders Statement, Pittsburgh Summit, 24–25 September, Pittsburgh, viewed 24 June 2014.

43 For example, Dodd-Frank Wall Street Reform and Consumer Protection Act, 2000.

44 For example:

  • Formed in May 2014, the Cross-Border Regulation Forum (CBRF) is an international group of financial services trade associations, investment banks, brokerage houses, market infrastructure operators and consumers of financial services formed “to help improve and encourage the dialogue on international regulatory standards”.
  • The ‘Financing Growth’ taskforce of the B20 is examining how core global reforms in financial services can be implemented in a way that promotes an integrated global financial system. B20 2014, Summary of B20 2014 Priorities, B20, Sydney, viewed 24 June 2014.

45 Stevens, G 2013, Financial Regulation: Australia in the Global Landscape, RBA, Sydney, viewed 21 June 2014.

46 Australian Government 2014, Statements of expectations, Australian Government, Canberra, viewed 21 June 2014

47 Key examples, all from the US, include the Patriot Act, Sarbanes-Oxley Act, Foreign Account Tax Compliance Act and Dodd-Frank. The Australian Bankers’ Association (ABA) discusses the impact of some of these pieces of US regulation on the Australian financial system in ABA 2014, First round submission to the Financial System Inquiry, pages 106–108.

48 Reserve Bank Australia 2014, data provided to Financial System Inquiry, 21 March 2014.

49 Calculations based on reported gross written premium, QBE Insurance Group 2013, 2013 Annual Results Presentation, viewed 21 June 2014.

50 IAG 2014, Financial Results Half Year Ended 31 December 2013, presentation, IAG, Sydney, viewed 21 June 2014.

51 Macquarie 2014, Macquarie in Asia, Macquarie, viewed 21 June 2014.

52 Australian Bureau of Statistics (ABS) 2014, International Trade in Goods and Services, Australia, May 2014, cat. no. 5368.0.55.006, ABS, Canberra.

53 ASIC 2012, Regulatory Guide 54, Principles for cross-border financial regulation, ASIC, Sydney, viewed 21 June 2014. See also Reserve Bank of Australia 2014, Assessing the Sufficient Equivalence of an Overseas Regulatory Regime, RBA, Sydney, viewed 21 June 2014.

54 ASIC 2012, Regulatory Guide 54, Principles for cross-border financial regulation, ASIC, Sydney, viewed 21 June 2014.

55 European Securities and Markets Authority (ESMA) 2013, Final report Technical advice on third country regulatory equivalence under EMIR — Australia, ESMA, Brussels, viewed 21 June 2014.

56 ASIC 2014, First round submission to the Financial System Inquiry, page 26.

57 Australian Bureau of Statistics (ABS) 2014, Managed Funds, Australia, Mar 2014, cat. no. 5655.0, ABS, Canberra.

58 Securities and Futures Commission (SFC) 2013, Fund Management Activities Survey 2012, SFC, Hong Kong, viewed 19 June.

59 Monetary Authority of Singapore 2012, Singapore Asset Management Industry Survey, Monetary Authority of Singapore, Singapore, viewed 19 June.

60 The Corporations and Markets Advisory Committee (CAMAC) has also reviewed the operation of managed investment scheme laws and discussed its possible impediment to international integration. CAMAC 2014, Managed investment schemes, CAMAC, Canberra, viewed 19 June 2014.

61 Corman, M (Acting Assistant Treasurer) 2014, Asia Region Funds Passport to drive financial services export growth, viewed 19 June 2014.