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CIFR Financial System Inquiry Discussion

CIFR Financial System Inquiry Discussion

May 1, 2014 1:15 PM | Posted by Batten, Richard | Print this page

I attended a very interesting panel discussion on the Inquiry last night hosted by the Centre for International Finance and Regulation (CIFR) and KPMG.  The panel discussed a number of issues some of which were very similar to themes we idenitified in our submission and others taking a somewhat different approach.  Some of those points are set out below.

Dr Scott Donald, Deputy Director, Centre for Law, Markets & Regulation, UNSW

  • Two key themes in submissions relating to superannuation are: 1) cost of superannuation; 2) investment in infrastructure.
  • Evidence does not suggest that there is a problem in either area in Australia.
  • Superannuation costs are not particularly expensive compared to defined contribution schemes in other jurisdictions.  Defined contribution schemes offering choice of investment by their nature are more expensive than defined benefit schemes which are the most common form of superannuation outside Australia.
  • At $45-50 billion superannuation investments in infrastructure, Australia is ahead of most countries apart from Canada.

Dr Gordon Menzies, Deputy Director, Paul Woolley Centre, UTS Business School

  • Expressed the view that we should be wary of being over confident as result of our performance during the GFC.
  • There should be a higher level of financial regulation following the GFC to address the moral hazard resulting from Government support of the banks and deposits.

Andrew Dickinson, Partner, Financial Services, KPMG

  • The Inquiry should consider what our risk appetite for institutional failure should be.  At the moment, regulators seems to be striving for a zero rate of failure, but there is a cost tot that.
  • We need more rigour in cost analysis of regulation, not only focusing on the direct cost of compliance of the particular change but also indirect opportunity costs for the system as a whole in the context of the overall regulatory scheme.
  • Regulators should be given formal KPIs that they should be required to report against relating to regulatory objectives other than just stability, such as efficiency and innovation.
  • There should be greater emphasis on consistency of regulation between jurisdictions, particularly in the Asia-Pacific region and ensuring the concerns of our region are reflected in global arrangements.

Phil Coffey, Deputy CEO, Westpac

  • We should examine the costs of regulation, including the impact on the availability of services, market efficiency and pushing businesses into unregulated activities.
  • We need a moratorium on change so we can work through the consequences of all of the existing changes.
  • Consideration should be given to the reasons for and implications of the highest growth rates in superannuation being in relation to disengaged investors through default funds on one side and highly engaged investors through self-managed funds on the other.