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Wednesday, 18 June 2003
Page: 16801

Mr CADMAN (12:12 PM) —I was referring to the changes the government has introduced to provide a framework of prudential supervision for banks, insurance companies and other deposit takers as a response to the difficulties created by the collapse of HIH. The Treasurer in introducing the bill which established APRA said:

The operational effectiveness of the depositor protection provisions will be strengthened, by providing powers for early intervention in a financially troubled institution and by making clear that the regulator can wind up an insolvent entity. The APRA will also be given enhanced powers to take action in the case of financial difficulties experienced by life and general insurance companies, and superannuation funds.

He further said:

APRA will be governed by a nine member board, whose terms and conditions of appointment will be subject to determination by the Remuneration Tribunal. To ensure that there is a close relationship between APRA, the Reserve Bank and ASIC, two of APRA's board members will come from the Reserve Bank and one from ASIC.

The bill provides for the duties and statutory appointment of the Chief Executive Officer who will also be an APRA board member.

It is very interesting that at the time of the introduction of this legislation the Labor spokesman and Deputy Leader of the Opposition, Gareth Evans, who was responsible for financial matters, welcomed it. He said in 1998:

The new model of a single prudential regulator and a single market regulator, when it is finally fully implemented, will overcome a couple of fairly obvious weaknesses with the current arrangements. One is the split between the Commonwealth and state and territory regulator rules, with the Commonwealth hitherto being pretty much confined to banks and insurance but with the state and territory rules applying to building societies and credit unions, with differing restrictions and differing cost recovery regimes impacting on the competition potential between these various institutions. The other problem was the fragmented consumer protection regime where similar products were being overseen by different regulators with often different rules applying.

So there we have the opposition in favour of the establishment of APRA, as announced by the government. It was supported by the opposition spokesman. Senator Murray from the Democrats said:

Much of the legislation before us is about reorganising the institutions for regulation so that there is consistency across organisations providing similar services as the roles of the different parts of the financial industry merge and blur. The Australian Democrats do not have major problems with the model which Wallis legislation puts forward for the newest institutions and which in large part the government has now adopted.

Much of my time has been stolen, but I would briefly like to indicate that, although there was common agreement in the model's establishment, it was found by the royal commission to be flawed.

Today we are discussing a bill which will make obvious the changes recommended by Mr Justice Neville Owen, the royal commissioner. The changes that have been recommended by the commissioner are pretty simple. They relate to changes to the structure of the board so that there is a permanent governance structure and to the provision of advice to the minister. The minister may seek advice or ask for direction from APRA, and APRA must draw to the minister's attention details of institutions which may be in financial danger. With some other minor amendments with regard to confidentiality and the shifting of various clauses of the bill, we are now taking the step to rectify the problems identified by the royal commission. (Time expired)