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Monday, 20 August 2001
Page: 26118


Senator IAN MACDONALD (Minister for Regional Services, Territories and Local Government) (4:19 PM) —I table the revised explanatory memoranda relating to the bills and move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows

FINANCIAL SECTOR (COLLECTION OF DATA) BILL 2001

I rise today to introduce two Bills that give effect to the harmonisation and streamlining of the collection of statistical information across the financial sector.

While existing legislation provides for the collection of financial information, those powers are currently unwieldy and often uncertain. This legislation will clarify the regulator's powers in this area as well as provide a welcome reduction in the red tape associated with duplicate data collections in this field.

When the Australian Prudential Regulation Authority (APRA) was established on 1 July 1998, it inherited a variety of data-collection tools and analysis systems. These tools and systems were tailored to meet the data needs of APRA's predecessor organisations (the Insurance and Superannuation Commission, the Reserve Bank of Australia, State Supervisory Authorities and the Australian Financial Institutions Commission).

Three major problems can be identified with the existing arrangements.

First, the existing data-collection framework is fragmented, cumbersome and in some areas outdated. Presently, APRA collects 153 forms, comprising 17,000 data items. In some cases, the data collected are inadequate or no longer relevant to the performance of APRA's functions.

The second problem concerns the inflexibility and inconsistency of the current data-collection and publishing powers. APRA's current data-collection powers work in conjunction with its data publishing powers and both are contained in a variety of industry-specific legislation and regulation.

Finally, the current situation means that there is a significant overlap in reporting duties imposed on entities to provide similar data to different government agencies such as APRA, the Reserve Bank and the Australian Bureau of Statistics (ABS).

These Bills aim to facilitate the modernisation and increase the relevance of financial sector data collections, thereby ensuring that APRA collects the data it requires for prudential purposes. The data APRA collects will also continue to facilitate the formulation by the Reserve Bank of monetary policy. Secondly, they aim to harmonise and increase the flexibility of the data-collection and publishing regimes, and finally, to create a central point for the collection of financial data.

Overall, the proposed regulatory measures are designed to streamline and simplify the current data-collection methods and systems.

Improved data submission mechanisms and a reduction in the frequency of certain key collections will contribute to a substantial decrease in the amount of data required to be provided in total to APRA, the Reserve Bank and ABS, leading to a reduction in the compliance costs and time required to fulfil data providing duties. Financial institutions will not have to spend additional time providing similar data to the three agencies; instead, APRA will be the one-stop-shop, or data collection point.

The modernisation and harmonisation of collections across the three agencies will facilitate easier compliance with APRA's requests for data, as these will be more commercially aligned. The harmonisation of APRA's data collections with public disclosure requirements of provider institutions and with the financial collections of the ABS and Reserve Bank will make it simpler for institutions to comply.

The proposals will reduce by around 30 per cent the reporting burden on authorised deposit-taking institutions, measured in terms of the number of data items of this nature that are submitted to APRA, the Reserve Bank and the ABS. By ensuring that these three bodies work cooperatively in this endeavour, substantial savings in financial institution, human and systems resources will be effected over time.

The Financial Sector (Collection of Data) 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 commitment to 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.

I will now turn to the Bills in more detail.

APRA may determine Reporting Standards

The Financial Sector (Collection of Data) Bill proposes to establish a two-tiered regulatory system that will streamline the data collection processes for both APRA and the institutions it supervises.

· At the top level, the Bill contains broad principles and powers to enable the collection of information.

· At the second level, the detailed reporting requirements for financial institutions will be set out in `reporting standards' which will be subordinate to the legislation and will be made by APRA. The reporting standards will be disallowable instruments.

The reporting standards will be introduced progressively over the next two to three years, commencing with the authorised deposit-taking institution (ADI) sector from 1 July 2001. APRA will continue to hold in depth consultations with industry groups on the detailed requirements of the reporting standards before they are introduced.

Offences

Data needs to be received in a timely manner to permit the identification of financial institutions at risk and for the Reserve Bank's monetary policy purposes. Undue delays in receiving data of this nature can harm the ability of the regulatory bodies to carry out their statutory responsibilities. Late lodgment of statutory returns can seriously compromise APRA's ability to supervise effectively. In order to allow the regulator to work effectively, protecting the interests of depositors, fund members and policy holders, regulated institutions must provide necessary financial data in a timely fashion. Accordingly, it is considered to be appropriate and necessary for there to be significant disincentives for late lodgment.

The Financial Sector (Collection of Data) Bill facilitates the application of the Commonwealth's Criminal Code to offences.

It is not intended to apply these powers in cases where there are minor or inadvertent infringements, for example, when returns are just a few days late, which will most likely be the majority of cases. Accordingly, the Bill proposes the introduction of administrative penalties that could be used in lieu of the offences set out above.

The Financial Sector (Collection of Data Consequential and Transitional Provisions) Bill will repeal the Financial Corporations Act and consequentially amend all of APRA's industry supervision Acts (as well as several other Acts to simply update references to the proposed new Act) to remove their current data collection provisions. It also amends APRA's power to publish data received from financial institutions. It is proposed that APRA will generally only publish data in aggregate form, although some individual data will continue to be provided to the market place for market share analysis consistent with current practice.

Disclosure is necessary for effective market operation and to the minimal extent that APRA will publish prudential data, it will be required to consult with industry and obtain industry agreement.

APRA has consulted extensively on the Bills and there has been an overall positive reaction with significant support for the overall objectives of modernisation and rationalisation. APRA has provided presentations and held meetings with regional banks and banks in Sydney and Melbourne. APRA has also consulted with all major bodies including the Australian Superannuation Funds Association (ASFA), Australian Bankers' Association (ABA), Investment and Financial Services Association Limited (IFSA), Credit Union Services Corporation (Australia) Limited (CUSCAL) and the International Banks and Securities Association (IBSA).

These Bills not only build on the financial sector reforms already undertaken by this Government, they emphasise our commitment to ongoing reform which will ensure that Australia is at the forefront of world's best practice in financial market regulation.

The financial sector is a key driver in the economy. The benefits that these Bills will provide are clear.

The measures will further enhance access to data collected by APRA and foster more efficient regulation, leading to better prudential oversight of the financial industry. Furthermore, benefits will accrue to the users of financial services through greater confidence in financial services, greater safety for depositors, fund members and policy holders and a stronger financial sector.

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FINANCIAL SECTOR (COLLECTION OF DATACONSEQUENTIAL AND TRANSITIONAL PROVISIONS) BILL 2001

The provisions of this Bill have been addressed in the Second Reading Speech for the Financial Sector (Collection of Data) Bill 2001.

Debate (on motion by Senator Ludwig) adjourned.