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Monday, 13 March 2000
Page: 12575

Senator ALLISON (12:31 PM) —The Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 2) 1999 and associated legislation represent the third stage in the government's reforms to the regulatory framework of the Australian financial system. These amendments and transitional provisions are in response to a number of government inquiries, including most recently the financial system inquiry or Wallis report, as it has become known. The changes contained in this bill include: exempting the Australian Prudential Regulation Authority, or APRA, from paying sales tax; permitting the transfer of information collection functions from the Reserve Bank of Australia to APRA and the Australian Bureau of Statistics; enabling foreign banks to make use of certain taxation exemptions by extending the deadline for obtaining a banking licence; ensuring adequate disclosure prior to demutualisation of authorised deposit taking institutions; extending the range of material and information that may be submitted electronically by superannuation funds; and clarifying and restricting the availability of financial assistance to superannuation funds in the circumstances of fraud or theft.

The bulk of this bill and the associated levy bills is technical in nature and largely follows the general thrust of the Wallis report, and the Democrats will be supporting those measures. The Labor Party will be moving amendments to reduce the restrictions proposed by the government on the availability of financial assistance to superannuation funds in circumstances of fraud or theft. The government wants to restrict the availability of assistance only to funds where the fraud or theft is occasioned by people directly or indirectly involved in administering the funds. What this would mean is that, if a super fund had invested in Barings Bank and Nick Leeson's fraud wiped out that investment, there would be no prospect of the government moving in to secure the employees' savings. The government argues that this measure is necessary to remind super fund trustees that they are responsible for monitoring the performance of their investments. As a principle, I support that.

But the current law recognises that by creating an exception only in the case of funds being lost due to fraud or theft. Further, the provision of financial assistance is very much discretionary—the Treasurer can decide whether or not to do it. To reduce that discretion by denying bailouts in cases of fraud or theft by persons not directly or indirectly administering the fund strikes us as rather harsh. I would prefer to see the discretionary power retained.

Labor is also moving amendments to require the Treasurer's request to APRA for advice on financial assistance to funds to be tabled. There are arguments for and against this provision which is not really, in my view, a first order issue. I will be reserving my position on that until we get to committee. The Democrats will also be supporting the government's amendments to extend the deadline for foreign banks restructuring to fit in with the business tax reform timetable.