Economy Too Important for Hasty Regulatory Reaction
The federal government must commit to genuine and comprehensive consultation on its banking competition reforms to avoid unintended consequences that might disadvantage consumers, the Business Council of Australia (BCA) said today.
BCA Chief Executive Katie Lahey said federal government proposals to reform Australia’s banking system should be exposed to the full force of the government’s own best practice regulation-making processes.
“Given the significance of the measures announced – and the potential for some of the laws to be applied more broadly - a full Regulation Impact Statement (RIS) process should be followed,” Ms Lahey said.
“The government’s announced measures to improve competition in the Australian banking sector are a mixed bag. But before we leap to regulation there must be a thorough process to determine whether this is the right approach.
“We are concerned at the potential for regulatory overreach of the proposed consumer measures, particularly around price signalling. Although the measures to support smaller lenders may provide some limited benefit, we are however strongly supportive of the moves to enhance the corporate bond market and the covered bonds proposal.
“On the regulatory measures, the government has indicated that there will be some targeted consultation. We believe that full and rigorous RIS approaches should be followed for the regulatory proposals outlined in the government’s package.
“This includes identification of the specific problem to be addressed, consideration of alternative options to deliver on policy objectives including a full and transparent cost benefit analysis and a process of genuine consultation throughout the community.
“The government’s stated approach to major new regulation is that a detailed RIS should be prepared with an in-depth analysis that is commensurate with the magnitude of the problem and the size of the potential impacts of the proposal.
The BCA is concerned that aspects of the banking package – particularly those associated with amendments to the Competition and Consumer Act around new price signalling provisions - have the potential to have wider impacts.
The exposure draft bill to outlaw price signalling indicates that the laws are capable of being applied to other sectors – with the government yet to specify these sectors.
The Minister for Finance and Deregulation, Penny Wong, recently provided an undertaking to Parliament that the government was firmly committed to ensuring that any new regulation is necessary and appropriate for the purpose. An important element would be to ensure that proposed regulations are thoroughly scrutinised so they are introduced only where necessary and at minimum cost to business and consumers.
“The fact that submissions on the exposure draft price signalling legislation have been called for by 14 January 2011 itself signals that the consultation process will be truncated. This is far from best practice,” Ms Lahey said.
“The BCA acknowledges the government’s intention to improve Australia’s banking sector by better empowering consumers, strengthening the competitive environment and securing the long term sustainability of Australia’s financial system.
“Some features of the package will make a useful contribute to this objective, particularly the further investigation of covered bonds and the measures to develop Australia’s corporate bond market.
“But overall there are grounds to progress the measures cautiously. Regulatory intervention should be evidence-based and only introduced after broad consultation with stakeholders.
“We will be monitoring closely the government’s adherence to its own best practice regulatory processes.”