This is Part 2 of an article on Australia’s financial services regulatory framework. Part 1 is here. This part reviews announced reforms.

Regulatory response to sub-prime crisis and credit crunch

Australia has not been as affected by the sub-prime crisis and ensuing credit crunch as the USA. In spite of this, some well-publicised corporate collapses and problems with non-bank lenders have resulted in reviews of the following areas:

• ASIC review of unlisted, unrated debentures.
• ASIC review of equity stripping (predatory lending).
• Proposed national finance broker package (currently only Western Australia requires finance brokers to belicensed).
• Bank switching fees and entry and termination fees. An "account switching facilitation package" will include a central registry facility to collect details of customers’ direct debit and credit arrangements to make it easier for customers to switch their accounts between banks.
• Margin lending and short selling review by ASIC and the ASX (disclosure requirements of equity derivatives and hedge funds).
• Reserve Bank liquidity and lender of last resort policies.
• a Financial Claims Scheme (FCS)to assist depositors and policyholders in the event that an authorised
  deposit‑taking institution (ADI) or general insurer fails.The "early access facility", which would provide early repayment of up to $20,000 per depositor in the event of an ADI failure. It is estimated that this cap would besufficient to cover the entire deposits of around 80 per cent of depositors.

Green Paper on financial services and credit reform

The government has released a Green Paper outlining options for the Commonwealth and states to transfer the remaining financial services regulation from the State level. Under the plan, financial services, including mortgages, mortgage brokers, margin lending, non-bank lending and trustee companies, will move to the Federal level. The Green Paper also seeks input on the regulation of other credit products, such as credit cards and personal loans, as well as debentures and property spruikers.

COAG reform agenda

The prime minister, through the Council of Australian Governments, has established a Business Regulation and Competition Working Group to oversee regulatory reform. The COAG meeting on March 26 2008 agreed to an accelerated business regulation reform agenda across 27 areas of regulatory reform, to enhance productivity and workforce mobility by cutting the costs of regulation.

Consistency is also important as Australia has entered a number of international free-trade agreements

The 27 areas include: the consumer policy framework; mortgage credit and advice; margin lending; non-deposit taking institutions; and financial service delivery.

COAG also agreed that the working group should report back to COAG by the end of 2008 on new areas of competition reform, including unfinished national competition policy business and other new competition reforms.

The Standing Committee of Attorneys‑General (SCAG) also agreed in March 2008 to give priority to nationally consistent regulation and co-operation in the following areas:
* Interstate Enforcement of Fines
* Workplace Privacy
* Personal Property Securities Law Reform
* Tort Law – Proportionate Liability
* Accession to Hague Convention on Service Abroad
*National Electronic Conveyancing System
* Trustee Companies
* Uniform Spent Convictions
* Harmonisation of anti-discrimination laws
* Trans-Tasman court proceedings and regulatory enforcement
* National Legal Profession Model Laws

The next SCAG meeting will be in July 2008.

Personal property securities

The government recently released the exposure draft Personal Property Securities Bill for public comment. The bill sets out a national framework for personal property securities — or PPS. This follows the system in New Zealand, Canada and the United States. There are more than 70 different commonwealth, state and territory Acts that regulate personal property securities. After the reform, there will be only one Commonwealth Act.

The bill sets out the circumstances in which a security interest attaches to property. It will also govern the interaction between security interests and establish the rules that govern priority. This priority will largely be on a first-to-register basis. This will give greater certainty to financiers who will be able to ascertain the ranking of their security interest.

The bill will also establish a remedial process that secured creditors can use in the event of a default. The uniform Consumer Credit Code will continue to apply to consumer transactions for enforcement purposes.

Tax System Review

The Treasurer has announced a review of Australia’s tax system.

The review will encompass Australian Government and State taxes, except the GST, and interactions with the transfer system. In doing so the review will reflect the government’s policy not to increase the rate or broaden the base of the goods and services tax (GST); preserve tax-free superannuation payments for the over 60s; and the Government’s announced aspirational goals for personal income tax. However the review will extend to whether GST should be payable on the petrol excise tax.

The review will be conducted in several stages. An initial discussion paper will be released by the end of July 2008. The review panel will provide a final report to the Treasurer by the end of 2009.

Summary

Before commencing business in Australia you need to check whether your organisation needs to be licensed or whether your products or services are regulated. As the regulatory framework is being reviewed you need to have a system for monitoring changes and maintaining compliance.