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A changing landscape for our financial system

A changing landscape for our financial system

March 14, 2014 1:00 PM | Posted by Richard Batten, Tim Sutton | Print this page

It's been 17 years since Australia's last inquiry into its financial system. A lot has changed since the Wallis Report in 1997. Why the need for a new inquiry? What has changed since Wallis made his recommendations?

Since 1997, there have been significant developments affecting the Australian financial system. For example, the GFC challenged many of the assumptions upon which regulation was based. Globally, it resulted in the collapse of significant financial institutions and governments taking significant stakes in others, while in Australia, the government took steps to guarantee bank deposits. This led to a push for new regulation and the establishment of the Financial Stability Board overseas.

Advances in technology have transformed the financial landscape through changes such as the expanding role of online and mobile transactions and greater awareness of the importance of cyber security.

ASX no longer has a monopoly of equity trading with Chi-X now operating as an alternative trading venue. We have also seen significant changes to trading behaviour on financial markets in part based on the rise of electronic, algorithmic and high frequency trading. This has led to dramatically increasing trade volume and order to trade ratio.

We have seen the collapse of HIH and significant changes to the regulation of general insurers, the introduction of the Anti-Money Laundering and Counter-Terrorism Financing regime and the implementation of a national credit licensing regime administered by ASIC.

Over the last few years there has also been greater concern about the financial and social impact of increasing severity and frequency of natural disasters and the impacts on the insurance sector.

It seems the time is right for the new inquiry, as announced by the Australian Government late last year. This will allow us to consider the opportunities and challenges for our system both now and over the next 10-15 years.

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