The federal government has introduced legislation that requires the financial services regulator to “consider the effects that the performance of its functions and the exercise of its powers will have on competition in the financial system”.
The Treasury Laws Amendment (Enhancing ASIC’s Capabilities) Bill has been introduced to the Parliament to provide the Australian Securities and Investments Commission (ASIC) with a competition remit in its decision-making process.
The amendment builds on the recommendation made by the Financial System Inquiry to add competition to ASIC’s mandate. The government accepted this recommendation in October 2015.
It is believed that having an explicit reference to take competition issues into account would oblige ASIC to consciously consider how its actions may impact on competition in the financial system and would enable ASIC to favour one option over another due to its effects on competition.
For example, ASIC should consider whether its decisions would:
- create a barrier to entry, making it more difficult for new firms to enter the industry
- create regulatory advantages for some companies over others competing in the same sector, or generally across the industry as a whole
- improve consumers’ ability to exert demand-side competitive pressure in a market
- disproportionately impact small entities (for example, by imposing obligations that do not appropriately scale the regulatory risks presented by those entities) and the impact that would have on competition
- provide scope for competitively neutral approaches to be identified
However, the legislation states that competition should not be considered in isolation, but instead in tandem with improving the performance of the financial system and promoting commercial certainty and economic development and efficiency.
Minister for Revenue and Financial Services Kelly O’Dwyer said that she believes the proposed reform would ensure that customers and investors in the financial sector “get value for their money”, claiming that it would create a competition environment that would benefit financial service providers.
“Ultimately, it is competition — not regulation — that is the best means of ensuring that consumers and investors get value for money in financial products and services,” Minister O’Dwyer said.
“Both consumers and financial product and service providers, particularly new entrants, benefit from a more competitive financial system.”
If passed, the bill would also remove the requirement for ASIC to comply with employment provisions outlined in the Public Service Act 1999, providing it with greater recruitment flexibility to employ staff directly (rather than under the PSA).
The new law will also enable delegations to be made to senior staff members of ASIC (as determined by ASIC’s chairperson).
“To be able to perform their roles effectively in accordance with their legislative mandate, regulators need to be able to attract and retain suitably skilled and experienced staff,” Ms O’Dwyer added.
If passed, the legislation would be the second reform put forward by the federal government this year designed to enhance regulatory powers.
In February, the government passed the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017, designed to strengthen the Australian Prudential Regulation Authority’s crisis powers.