Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Strengthening Financial Sector Crisis Management Powers

Aust Gov
5th March 2019

Independent Review Department of the Treasury

On 19 October 2017, the Government introduced legislation to give the Australian Prudential Regulation Authority (APRA) additional powers for crisis resolution and resolution planning in relation to prudentially-regulated entities, in particular authorised deposit-taking institutions (ADIs) and insurers (general insurers and life insurance companies).

The global financial crisis (GFC) demonstrated the potential for severe adverse economic consequences where complex financial groups enter distress and this is not resolved in an orderly fashion. Informed by international developments in financial regulation following on from the GFC, APRA identified areas where its powers could be enhanced to facilitate the orderly resolution of an ADI or insurer so as to protect the interests of depositors and policyholders, and to protect the stability of the financial system. Some key areas in which APRA’s powers were enhanced included statutory and judicial management, directions powers, transfer powers, foreign branches and the financial claims scheme.

The Department of the Treasury certified that, collectively, three reports had undertaken a process and analysis equivalent to a Regulation Impact Statement (RIS), specifically, the Financial Services Inquiry Final Report, the Strengthening APRA’s Crisis Management Powers discussion paper and the Financial Claims Scheme consultation paper. The Office of Best Practice Regulation does not assess the quality of independent reviews and RIS-like processes used in lieu of a RIS. The Treasury was compliant with the Australian Government RIS requirements; however, the Treasury was not consistent with best practice at the transparency stage. This is because only a summary of the analysis was included in the explanatory memorandum of the bill.

The Treasury estimates average regulatory costs to be $1.3 million a year.

Financial System Inquiry Final Report [link]

Strengthening APRA’s crisis management powers: Discussion paper [link]

Financial Claims Scheme: Consultation Paper [link]

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