Essays on Regulation of Australian Financial System from 1996 to Date Case Study

Download full paperFile format: .doc, available for editing

The paper 'Regulation of Australian Financial System from 1996 to Date' is a great example of a Finance and Accounting Case Study. The year 1996 market a turnaround for the financial system in Australia. It is in this year that the Finance Treasurer announced the formation of the Financial System, Inquiry also known as the Wallis Inquiry, which was intended to check the financial system in the country. Specifically, the Inquiry was mandated to research and analyze the consequences of financial deregulation in the country since the 1980s and; analyze the driving forces affecting change in the Australian financial system, especially in view of technological development.

Based on the results of the exercise, the Inquiry was further mandated to provide regulatory recommendations that would be enforced in the country in order to ensure that the financial system was responsive, efficient, and flexible to the contemporary needs of Australia. It was hoped that proper regulations would lay the basis for financial stability, better economic performance, integrity, fairness, and prudence in the country’ s financial system (Commonwealth of Australia, 2009). Prior to this, the financial system had been de-regulated in the 1980s, around the same time that the Australian Dollar was floated (Cameron, 1998). Upon the completion of the inquiry, the FSI proposed a regulation system based on three agencies namely (i) the central bank, (ii) a prudential regulator, and (iii) “ a corporation and financial services commission” (Cameron, 1998, p.

4). Before 1997 The recommendations made by the Wallis Inquiry were enacted in 1997 (Bakir, 2003). Before this, however, Australia had a largely semi-regulated financial system. The bulk of the regulators back then followed under the commonwealth with the main mandate of overseeing them falling under the treasurer.

States also regulated a small number of players in the financial system mainly under the ministerial council watch. Under the treasurer was the ACCC, which was in charge of consumer protection and trade practices; RBA, which was in charge of banks; Insurance and Superannuation Commission, which was in charge of general insurers, superannuation, and life insurers, and; Australian Securities Commission, which was in charge of corporations’ law, market integrity and unit trusts. The Ministerial councils on the state level hand on the other hand the mandate to oversee the operations of the Australian Financial Institutions Commission, which was in turn charged with the responsibility of overseeing the operations of credit unions and building societies (Bakir, 2009, p.

912). Overall, there were 11 supervisory agencies in the country’ s financial system, which formed the “ Council of Financial Supervisors” , which according to Bakir (2009) were not only a “ historical accident” on the part of the country but continued to be a great injustice to the proper functioning of the financial system in Australia (p.

7). Among the most stated anomaly of the pre-Wallis period were the regulatory gaps, discord, and overlaps that the different agencies created in the financial system by their inconsistent mode of treating financial products. More to this, consumers complained of bureaucracy, which cost them money and much valuable time. On a much lower level, constant attempts were being made to reform the financial system. In 1990 for example, two of the country’ s largest life-insurance companies (National mutual and ANZ) wanted to merge. However, the Commonwealth blocked their bid, stating that any such action would reduce competition, thus further jeopardizing the financial system.

Further, the government prohibited the four big banks in the country from going into mergers, citing the same reason it did for the insurers (Gizycki & Lowe, 2000, p. 190).

References

Australian Securities & Investments Commission. 2010. Market Supervision and Surveillance. viewed 05 August, 2010,

Bakir, C. 2003, ‘Governance in financial supervision: The Australian Experience in the 1990s,’ refereed paper presented to the Australasian Political Studies Association Conference University of Tasmania, Hobart, pp. 1-17.

Bakir, C. 2009, ‘The governance of financial regulatory reform: the Australian experience,’ Public Administration Journal vol. 87, No. 4, pp. 910-922.

Cameron, A. 1998, Rationalisation of the Australian regulatory system, Australian Securities and Investments commission, viewed 05 August, 2010,

Cooper, J. 2000, ‘The Integration of Financial regulatory authorities- the Australian experience,’ Australian Securities & Investments Commission, pp. 1-16.

Gaetjens, P., Ingram, V. & Furnell, P. 1998, Treasurer heralds new era for financial System regulation, Australian Prudential Regulation Authority: Treasurer’s media release, viewed 05 August, 2010,

Gizycki, M. & Lowe, P. 2009, ‘The Australian financial system in the 1990s,’ RBA Conference, vol. 2000, pp.182-215.

Kidwell,D., Blackwell, D., Whidbee, D. & Peterson, L. 2008, Financial Institutions, markets and Money, John Wiley & Sons, London.

Littrell, C. 2003, APRA’s role and approach to regulation (under FSR), Australian Prudential Regulation Authority, viewed 05 August, 2010,

Reserve Bank of Australia. 2010. Financial System Inquiry. viewed 05 August, 2010,

Download full paperFile format: .doc, available for editing
Contact Us