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Key pressure points in the financial system

Key pressure points in the financial system

July 16, 2014 2:37 PM | Posted by Richard Batten | Print this page

The release of the interim Financial System Inquiry report identifies some significant areas where changes to the system need consideration.

The key touchstones of the Inquiry for assessing the performance of the financial system and its regulatory structure are efficiency, stability and fairness. This focus reflects our view that change is required to promote innovation, efficiency and competition in the financial system.

However, the focus is on facilitating the operation of and improving access to the financial system rather than radically transforming it. For example, the Inquiry concluded that the banking system is generally competitive, although it identifies some areas where regulation may be impeding competition or may need to change to reduce the moral hazard of institutions that are perceived to be 'too big to fail'.

Key pressure points

Of particular interest was the Interim Report’s recognition of key pressure points for the 21st century, including the significant challenges arising from increased globalisation, the impact of technology, and demographic change.

Consideration about the extent to which regulation imposes a regulatory burden – and whether Australia should aim to be ‘ahead of the curve’ in a global sense or sit ‘within the pack’ on this point – was also a key issue that resonated.

It is still unclear which way the FSI Panel is leaning on this – but there is no doubt of its view that Australia's regulatory system should not take a minimum possible compliance approach.

This is an important issue in the current global economic environment, and its resolution is likely to have a significant impact on businesses across Australia.

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