The Financial Systems Inquiry has heard loud and clear industry concerns about over-regulation, says the inquiry’s head.
In a recent speech to the Australian Business Economists association, FSI Chairman David Murray says the inquiry’s initial consultation process has now finished and the most frequent issue raised was regulation.
“Major financial providers are telling us the financial system is competitive but over-regulated, and may be uncompetitive in some sectors internationally,” he says.
“Smaller players are saying they are disadvantaged, asking us to ‘level the playing field’ (on regulation, competition and cost).”
However, on early evidence Murray’s focus seems to be predominantly focused on the banking sector, with his sole mention of the insurance industry centred on the health and life insurance sectors.
Murray also notes that the changes being wrought by technology are also a key theme of many of the more than 270 submissions received.
He says research shows almost all Australians have used the internet to research and to buy products and services.
“Traditional product disclosures are falling behind technological innovation. Consumers now regularly compare products online,” he says.
This issue formed a key part of NIBA’s submission to the inquiry, in which CEO Dallas Booth argued that regulators across the world were realising product disclosure statements don’t create better-informed consumers and don’t lead to them making better financial decisions.
“For technology issues a key trade-off will be between stability (particularly of our payments system) and fostering an environment where innovation and technology can better meet user needs,” Murray says.
“We will be posing questions in our Interim Report on a number of areas where technology is challenging existing business models, delivery channels and current regulatory settings.”
The interim report will be released in July, and will ask for submissions on specific questions regarding the right balance for the financial system.
“We must balance the objectives of the system, which will not be a simple exercise,” Murray says. “Risk, in particular, presents complex tensions.”