Finance Finance News Murray Inquiry recommendations

Murray Inquiry recommendations

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1. Resilience

1 Capital levels
Set capital standards such that Australian authorised deposit-taking institution capital ratios are unquestionably strong.

2 Narrow mortgage risk weight differences
Raise the average internal ratings-based (IRB) mortgage risk weight to narrow the difference between average mortgage risk weights for authorised deposit-taking institutions using IRB risk-weight models and those using standardised risk weights.

3 Loss absorbing and recapitalisation capacity
Implement a framework for minimum loss absorbing and recapitalisation capacity in line with emerging international practice, sufficient to facilitate the orderly resolution of Australian authorised deposit-taking institutions and minimise taxpayer support.

4 Transparent reporting
Develop a reporting template for Australian authorised deposit-taking institution capital ratios that is transparent against the minimum Basel capital framework.

5 Crisis management toolkit
Complete the existing processes for strengthening crisis management powers that have been on hold pending the outcome of the Inquiry.

6 Financial Claims Scheme
Maintain the ex post funding structure of the Financial Claims Scheme for authorised deposit-taking institutions.

7 Leverage ratio
Introduce a leverage ratio that acts as a backstop to authorised deposit-taking institutions’ risk-weighted capital positions.

8 Direct borrowing by superannuation funds
Remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds.

Chapter 2: Superannuation and retirement incomes

9 Objectives of the superannuation system
Seek broad political agreement for, and enshrine in legislation, the objectives of the superannuation system and report publicly on how policy proposals are consistent with achieving these objectives over the long term.

10 Improving efficiency during accumulation
Introduce a formal competitive process to allocate new default fund members to MySuper products, unless a review by 2020 concludes that the Stronger Super reforms have been effective in significantly improving competition and efficiency in the superannuation system.

11 The retirement phase of superannuation
Require superannuation trustees to pre-select a comprehensive income product for members’ retirement. The product would commence on the member’s instruction, or the member may choose to take their benefits in another way. Impediments to product development should be removed.

12 Choice of fund
Provide all employees with the ability to choose the fund into which their Superannuation Guarantee contributions are paid.

13 Governance of superannuation funds
Mandate a majority of independent directors on the board of corporate trustees of public offer superannuation funds, including an independent chair; align the director penalty regime with managed investment schemes; and strengthen the conflict of interest requirements.

Innovation

14 Collaboration to enable innovation
Establish a permanent public–private sector collaborative committee, the ‘Innovation Collaboration’, to facilitate financial system innovation and enable timely and coordinated policy and regulatory responses.

15 Digital identity
Develop a national strategy for a federated-style model of trusted digital identities.

16 Clearer graduated payments regulation
Enhance graduation of retail payments regulation by clarifying thresholds for regulation by the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.

Strengthen consumer protection by mandating the ePayments Code. Introduce a separate prudential regime with two tiers for purchased payment facilities.

17 Interchange fees and customer surcharging
Improve interchange fee regulation by clarifying thresholds for when they apply, broadening the range of fees and payments they apply to, and lowering interchange fees.

Improve surcharging regulation by expanding its application and ensuring customers using lower-cost payment methods cannot be over-surcharged by allowing more prescriptive limits on surcharging.

18 Crowdfunding
Graduate fundraising regulation to facilitate crowdfunding for both debt and equity and, over time, other forms of financing.

19 Data access and use
Review the costs and benefits of increasing access to and improving the use of data, taking into account community concerns about appropriate privacy protections.

20 Comprehensive credit reporting
Support industry efforts to expand credit data sharing under the new voluntary comprehensive credit reporting regime. If, over time, participation is inadequate, Government should consider legislating mandatory participation.

4. Consumer outcomes

21 Strengthen product issuer and distributor accountability
Introduce a targeted and principles-based product design and distribution obligation.

22 Introduce product intervention power
Introduce a proactive product intervention power that would enhance the regulatory toolkit available where there is risk of significant consumer detriment.

23 Facilitate innovative disclosure
Remove regulatory impediments to innovative product disclosure and communication with consumers, and improve the way risk and fees are communicated to consumers.

24 Align the interests of financial firms and consumers
Better align the interests of financial firms with those of consumers by raising industry standards, enhancing the power to ban individuals from management and ensuring remuneration structures in life insurance and stockbroking do not affect the quality of financial advice.

25 Raise the competency of advisers
Raise the competency of financial advice providers and introduce an enhanced register of advisers.

26 Improve guidance and disclosure in general insurance
Improve guidance (including tools and calculators) and disclosure for general insurance, especially in relation to home insurance.

5. Regulatory system

27 Regulator accountability
Create a new Financial Regulator Assessment Board to advise Government annually on how financial regulators have implemented their mandates.

Provide clearer guidance to regulators in Statements of Expectation and increase the use of performance indicators for regulator performance.

28 Execution of mandate

Provide regulators with more stable funding by adopting a three-year funding model based on periodic funding reviews, increase their capacity to pay competitive remuneration, boost flexibility in respect of staffing and funding, and require them to undertake periodic capability reviews.

29 Strengthening the Australian Securities and Investments Commission’s funding and powers
Introduce an industry funding model for the Australian Securities and Investments Commission (ASIC) and provide ASIC with stronger regulatory tools.

30 Strengthening the focus on competition in the financial system
Review the state of competition in the sector every three years, improve reporting of how regulators balance competition against their core objectives, identify barriers to cross-border provision of financial services and include consideration of competition in the Australian Securities and Investments Commission’s mandate.

31 Compliance costs and policy processes
Increase the time available for industry to implement complex regulatory change.

Conduct post-implementation reviews of major regulatory changes more frequently.

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