Australian government responds to Financial Systems Inquiry
(21 October 2015 - Australia) Following recommendations from the Financial System Inquiry, Australia’s banking regulator will take additional steps by the end of next year to ensure the nation’s lenders have strong capital levels, the government announced on Tuesday.
Treasurer Scott Morrison said in report released this week that the banking sector has “potential vulnerabilities” due to their dependence on foreign funding and mortgages and therefore requiring stronger regulations compared to similar economies.
“The resilience measures will ensure the banking system is more stable by holding more capital, and will address risk weights, leverage, loss absorbency and regulators’ crisis management powers,” the government said.
“By requiring banks to take greater responsibility for their own resilience, the need for taxpayer-funded bailouts is reduced.”
The government on Tuesday accepted the majority of the 44 recommendations made by the Inquiry, which was chaired by former Commonwealth Bank of Australia CEO David Murray.
Other recommendations highlighted by the report include the simplification of disclosure requirements for large companies issuing “simple” corporate bonds to private investors. Additionally, it will review laws to support crowd-sourced equity funding and develop laws to ban excessive credit card surcharges.
The government also recommended a review of the corporate regulator’s enforcement regime.
Responding to the inquiry in July, the Australian Prudential Regulation Authority (APRA) increased banks’ mortgage risk weightings, or the capital they must hold against potential home loan defaults, to 25 percent.
In order to be considered among the world’s safest lenders, APRA said banks would need to raise their capital ratios by 2 percentage points.
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