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Monday, 12 February 2018
Page: 1003

Mr SUKKAR (DeakinAssistant Minister to the Treasurer) (17:50): I thank the member for Calare. Indeed, I thank all of those members who've contributed to this debate today. The landmark reforms contained within the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017 will protect Australians and Australia's financial system for generations to come. While Australia avoided the worst effects of the great recession that followed the global financial crisis, we can't just rest on our laurels. We're beneficiaries of the robust economic management and effective regulatory reform undertaken by the Howard government, but we can never be complacent. Successive reviews, including the coalition government's Murray Financial System Inquiry, have made the case that our crisis management powers need to be strengthened. We must strengthen crisis management powers when the financial system is healthy. Now is the time to do this.

The international experience from the global financial crisis demonstrated that regulators need powerful, flexible and timely tools to resolve financial institutions in distress. Even though APRA has a reasonable toolkit to deal with these crises, there are deficiencies that need to be addressed to ensure the right tools are available to deal with these crises. The bill has two core themes: resolution planning and resolution powers. APRA needs to be prepared for and manage a crisis that could occur in many different ways. Firstly, resolution planning refers to the process of banks and insurers working with APRA to ensure they are ready for stress events. APRA already puts considerable effort into resolution planning, but the legislative framework does not give APRA clear powers to make prudential standards for resolution. We are addressing this gap. These amendments will substantially reduce the wider financial system impact and cost to the taxpayer of a stress event. They put APRA in a position to address barriers to the orderly resolution of an entity.

Secondly, resolution powers are the tools that APRA can use to deal with a distressed institution, including its corporate group entities. The bill strengthens APRA's toolkit by making amendments to: enhance APRA's statutory and judicial management regimes to ensure their effective operation in a crisis involving a bank or insurer and their group companies; enhance the scope and efficacy of APRA's existing directions powers, which require banks and insurers to address prudential issues; improve APRA's ability to implement a compulsory transfer of business of a regulated entity; ensure the effective conversion and write-off of capital instruments to which the conversion and write-off provisions in APRA's prudential standards apply; enhance stay provisions and ensure that the exercise of APRA's powers don't trigger certain rights in the contracts of relevant entities within the same group; enhance APRA's ability to respond when an Australian branch of a foreign bank may be in distress; enhance the efficiency and operation of the FCS and ensure that it supports the crisis resolution framework; and enhance and simplify APRA's powers in relation to the wind-up or external administration of regulated entities under the industry acts, and other related matters.

These amendments will significantly strengthen APRA's capabilities as a resolution authority, accompanying its traditional role as a prudential supervisor. They will ensure that Australia keeps up with international best practice for crisis management. While the government does not wish to see the day that these powers ever need to be used, we're taking the responsible course of action to safeguard the financial system for the wellbeing of the Australian people. I therefore commend this bill to the House.

Question agreed to.

Bill read a second time.

Message from the Administrator recommending appropriation announced.