The wide scope of the Financial System Inquiry and the commitment of the Inquiry panel members to consult was apparent at the Brisbane evening forum on 19 August.
About 25 people turned up to put their views to, and get some feedback from, David Murray, Carolyn Hewson and Brian McNamee.
The panel members were patient and earnest as they listened to questions and comments on issues as diverse as credit card surcharges, Glass-Steagall, competition, small business lending, investor protection, social venture funding, SMSFs, sources of retirement income and ASIC’s role as consumer credit regulator.
But David Murray ruled out free trade, the concept of money and tax (other than relating to retirement income) as out of scope.
It is on the issue of disclosure that David Murray became most animated: does disclosure help consumers or not? Should there be more emphasis in payday lending advertising on the real cost? Should retail investors in hybrid bonds receive more up front explanation of the “bail-in” risks? He mentioned disclosure of ownership by banks of their brands. Is there an alternative to lengthy disclosure documents?
Disclosure is not sufficient on its own, he said. He wants to put the onus on financial institutions to provide products that are suitable to investors.
On the issue of competition he observed that it is not clear how to balance stability and competition. Technology will create more competition but the 4 pillars are very important. But he emphasised that competition is important and that he doesn’t want it to fall between the cracks.
He discussed the concept of an industry funded model for ASIC as a possible solution to providing resources outside of the Budget process. He queried whether that would affect ASIC’s accountability to Parliament.
He talked about the level of bank capital: he says the real issue is the level required to attract foreign investment on reasonable terms.
Brian McNamee talked about regulation of SMSFs and protection for whistleblowers.
Carolyn Hewson talked about financial advice: the competence, education and training of advisers is not best practice. She said the interests of advisers are not clearly aligned with buyers. She discussed conflicted remuneration in financial advice, the recent FOFA changes and the opportunity for cost effective scaled advice.
She also discussed social venture funding including social bonds.
David Murray ended the evening with a comment on regulation: longer and more complex regulation restricts competition.
Submissions in response to the Interim Report are due by 26 August 2014.
