The Productivity Commission's damning report about the lack of competition within Australia’s financial system is recommending a regulatory overhaul of the area.
In its draft report on competition in Australia’s financial system, released on Wednesday (7 February), the Productivity Commission argued for comprehensive reform of the regulatory environment.
At present, the Australian Competition and Consumer Commission (ACCC) is the chief regulator when it comes to competition in Australia.
However, the Productivity Commission noted that the ACCC is “not a counterweight to the financial regulator’s interests in stability”.
“The ACCC’s primary power lies in responding to evidence of a substantial lessening of competition in a market. It does not extend to knowing in advance of a financial regulator’s proposed actions or reviewing the competition consequences of such actions,” the report said.
Therefore, there is no agency tasked with “monitoring and enhancing competition and hence supporting innovation in the financial system”.
Rather than creating yet another regulator, the Productivity Commission recommended expanding the mandate of either ASIC or the ACCC to make it a “champion of competition” within the financial system.
Since the ACCC would have to increase its expertise in the financial sector to take on the role, it makes sense for ASIC’s powers to be extended, the report said.
“ASIC’s role in the financial system gives it a deep understanding of both supply and demand issues at the product level and experience as a regulator in the relevant markets,” the Productivity Commission said.
“It would be well placed to promote competition and assess proposed actions of other regulators.”
Expanding ASIC’s mandate to explicitly include competition was recommended by David Murray’s Financial System Inquiry, the report said, and is “well overdue”.
Under the change, Australia’s corporate regulator would take on a similar role as the UK’s Financial Conduct Authority (ASIC’s equivalent).
“The UK Financial Conduct Authority can serve as a possible example of a proactive financial regulator that has refocused its internal culture on the promotion of competition, alongside market conduct and consumer protection,” the report said.
Written submissions on the Productivity Commission’s draft report are due by 20 March 2018, with the final report expected to be handed to the government by 1 July 2018.