Second Reading SpeechMr Hockey (North Sydney - Minister for Financial Services and Regulation)
I rise today to introduce a bill that further improves Australia's world-class financial regulatory system. This bill builds on the financial sector reform legislation already implemented by this government in response to the recommendations of the 1997 financial system inquiry, chaired by Mr Stan Wallis. That package of legislation instituted wide-ranging measures aimed at improving the efficiency, competitiveness and stability of Australia's financial system.
These reforms have not gone unrewarded. Indeed, one of the underlying factors in Australia's strong performance throughout the Asian crisis was the capacity of our financial markets to maintain stability in performing their basic functions. The performance of Australia's markets during this time has been recognised internationally. The United States Federal Reserve chairman, Dr Alan Greenspan, told the International Monetary Fund and World Bank seminar in Washington late last year that Australia's economy had been largely unaffected by the recent Asian financial turmoil `arguably because Australia already had well-developed capital markets as well as a sturdy banking system'.
The Financial Sector Legislation Amendment Bill is modest in the context of the overall financial sector reform package undertaken by this government. Nevertheless, it is an important step in the government's drive to develop and maintain a world-class regulatory framework for the Australian financial sector: a framework which assists the financial sector to be efficient, responsive, competitive and flexible but which retains the principles of stability, prudence, integrity and fairness. The focus of this bill is to:
- help ensure the safety of superannuation savings by strengthening the enforcement provisions of the Superannuation Industry (Supervision) Act 1993;
- enhance the operation of the Banking Act 1959; and
- simplify and modernise service provisions in the Reserve Bank Act 1959.
These measures will update and enhance Australia's financial sector legislation. In particular, they will provide a more effective enforcement framework for the superannuation industry. This is a significant issue, given the strong growth in superannuation savings and their increasing importance as a source of income for individuals in their retirement. I will now turn to the bill in more detail.
Amendment of the Superannuation Industry (Supervision) Act 1993
The bill enhances the enforcement provisions in the Superannuation Industry (Supervision) Act 1993. The amendments include: giving powers to the regulators to disqualify persons from managing superannuation savings in certain circumstances; allowing the regulators to accept enforceable undertakings similar to the powers provided under the Trade Practices Act 1974 and the Corporations Law; clarifying the time limit within which prosecutions may be commenced; and changes to various offence provisions. Certain amendments also facilitate the application of the Commonwealth's Criminal Code to offences in the Superannuation Industry (Supervision) Act 1993.
Amendment of the Banking Act 1959
The bill provides for a set of miscellaneous amendments to the Banking Act 1959. With the exception of the unclaimed moneys provisions, these amendments are designed to enhance the prudential regulation of auth-orised deposit-taking institutions, ADIs.
In particular, this bill grants the Treasurer, or delegate, power to attach conditions to his or her consent for an ADI to reconstruct or demutualise. This will ensure that any undertakings made by an applicant are enforceable and may facilitate a greater number of applications receiving consent.
This bill also provides the Australian Prudential Regulation Authority, APRA, and the Treasurer, or delegate, power to seek an injunction if certain sections of the Banking Act are breached. It also ensures that references to `information' throughout that act have consistent meanings. Furthermore, this bill widens the circumstances where APRA can issue directions if it considers that there is a prudential risk, and clarifies that APRA has the power to appoint itself to investigate the affairs of an ADI.
In relation to unclaimed moneys, this bill facilitates the rationalisation and consolidation of the Commonwealth's unclaimed moneys provisions. Specifically, the bill allows the Treasurer to delegate his or her functions under the Banking Act to other Treasury portfolio agencies in addition to the Department of the Treasury.
Amendment of the Reserve Bank Act 1959
The bill amends the Reserve Bank Act 1959 to simplify and modernise the Reserve Bank service. Service provisions cover the Reserve Bank's ability to engage staff and formulate their conditions of employment. The replacement provisions are more appropriate to modern day management and are consistent with reforms in the Commonwealth public sector.
The bill also makes minor miscellaneous amendments to other pieces of financial sector legislation. Further, it clarifies the extent of APRA's powers to provide actuarial services over the period the Australian Government Actuary was part of APRA.
This bill not only builds on the financial sector reforms already undertaken by this government but emphasises our commitment to ongoing reform which will ensure that Australia remains at the forefront of world's best practice in financial market regulation.
The financial sector is a key driver in the economy. The measures contained in this bill will further enhance this sector's ability to contribute to our record economic growth; they help consolidate Australia's position at the leading edge of financial sector reform; and, finally, they contribute to our continued efforts to secure Australia's place as a centre for global financial services.
I commend the bill to the House and present the explanatory memorandum.