Financial Crime World

Financial Regulatory Bodies in Australia Take Centre Stage

The Australian financial regulatory framework was introduced on July 1, 1998, in response to the recommendations of the Financial System Inquiry, also known as the Wallis Committee. The framework is overseen by four key member agencies of the Council of Financial Regulators (CFR), each with distinct responsibilities outlined in their statutory mandates.

Key Regulatory Agencies

  • Australian Prudential Regulation Authority (APRA): Responsible for prudential supervision of individual financial institutions, ensuring they operate safely and soundly.
  • Australian Securities and Investments Commission (ASIC): Focuses on market integrity and consumer protection across the financial system.
  • Reserve Bank of Australia (RBA): Plays a crucial role in monetary policy, overall financial system stability, and regulation of the payments system.
  • Australian Treasury: Advises the government on financial stability issues and provides input on the legislative and regulatory framework underpinning financial system infrastructure.

Regulatory Objectives

The Australian regulatory system does not aim to ensure that financial institutions will never fail. Instead, it is designed to:

  • Promote effective governance of risk-taking by institutions
  • Minimize adverse effects if an institution becomes distressed
  • Manage an orderly exit of an unviable institution, minimizing losses to beneficiaries and disrupting the broader financial system as little as possible

Balancing Risk-Taking with Consumer Protection

The regulatory framework in Australia is designed to strike a balance between promoting risk-taking by institutions and ensuring that investors and consumers remain informed about the risks involved. Instead of imposing severe limitations on risk-taking, the CFR agencies focus on measures to mitigate losses and disruption to the broader financial system.

In summary, the Australian financial regulatory bodies work together to promote effective governance of risk-taking by institutions, minimize adverse effects if an institution becomes distressed, and ensure that investors and consumers remain informed about the risks involved.