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The Australian Experience

The Australian Experience. Financial Market Convergence – Implications for Regulators and Regulatory Structures Regulatory and Supervisory Issues in Private Pensions and Life Insurance Craig Thorburn Cthorburn@worldbank.org +1 (202) 473 4932. Brief Overview of Recent History.

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The Australian Experience

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  1. The Australian Experience Financial Market Convergence –Implications for Regulators and Regulatory Structures Regulatory and Supervisory Issues in Private Pensions and Life Insurance Craig Thorburn Cthorburn@worldbank.org +1 (202) 473 4932

  2. Brief Overview of Recent History • Regulatory Reform introduced after extensive inquiry • New Structure of Regulatory Bodies • New Structure within APRA • New Regulations and Supervisory Approaches

  3. History • 1996 - New Government elected with policy for a Financial System Inquiry, and visionary statements about making Australia a Financial Centre in the Asia Pacific Region • March 1997 “Wallis” Inquiry reports

  4. Functional versus Institutional Approaches ASIC (and ACCC) ASIC APRA RBA Australian functional approach highlights enormous need for communication and co-ordination

  5. Organisational Change • July 1998 – APRA formed, ASIC takes over market conduct • July 1999 – APRA adds state based regulators • August 1999 – APRA’s new structure commences

  6. No industry oriented divisions or staffing groups Cross divisional teams seen as temporary and supplementary A ‘purpose oriented’ structure

  7. Key Challenges • Relocation • Making the new structure work • Inventing common processes • Moving toward common legislation and prudential standards • Developing consistency of approach • “our prime objective is to supervise similar risks in similar ways, regardless of where they occur” as this will lead to a more competitively neutral system and therefore a more efficient one”

  8. Responding to the Expectation of Consolidated Supervision • Widespread industry expectation that there would be capital relief has dissipated • Industry given a standard on supervision that did not lead to any material market change • ELE concept introduced (as a ‘concession’) but no relief there either

  9. The Environment Changes • Responding to failures and losses in superannuation and non life insurance • “the need for more effective supervision to meet community expectations”

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