In its submission to the Financial Services Inquiry, chaired by former CBA chief executive David Murray, the big bank recommended an improvement in regulatory efficiency; an increase in ‘best practice’ regulation; and better managed global financial regulatory reform and harmonisation.
“The regulatory environment has not undergone a holistic review since the [1997] Wallis Inquiry established the ‘twin peaks’ model,” the CBA submission said.
“The split of prudential regulation from conduct and disclosure regulation has worked well and Commonwealth Bank continues to support it.”
However, a “significant amount” of new regulation has been introduced since the Wallis Inquiry, the submmission added.
“The development and implementation of some of this regulation has resulted in inefficient outcomes. Commonwealth Bank also believes that the increasing burden that new regulation places upon boards of directors can blur the distinction between the roles of management and directors,” CBA said.
Regulatory inefficiencies can be a barrier to competition; distract from more serious “stability threats posed to the system”; stifle innovation; and create higher compliance costs that are passed on to consumers, the submission stated.
The Office of Best Practice Regulation (OBPR) should add a new component to its principles and processes that “examines the problem to be addressed and why regulation is the preferred solution”, CBA recommended.
The OBPR should also require mandatory regulator impact statements (RISs) and post-implementation reviews (PIRs), CBA added in the submission, pointing to the FOFA reforms timeframe as a particularly poor example of regulatory change.
“The consultation period on the draft legislation in 2011 provided less than three weeks to comment on the first and second tranches of legislation,” said the bank.
Where the legislation was delayed or modified, a final guide to industry was released “only weeks” before the commencement date for the new law, CBA stated.
“This left industry insufficient time to interpret the final guidance and build in business processes; ultimately, a facilitative compliance approach was required.”
Furthermore, the OBPR noted that only one “adequate” RIS was developed for FOFA in August 2011, according to CBA.
“[The OBPR] noted that RISs prepared for other elements of the reform package were inadequate, particularly due to the lack of impact quantification regarding industry costs or consumer benefits,” the submission said.
