On Tuesday, Treasurer Josh Frydenberg released the report, which was compiled by the council mid-last year after consultation with stakeholders including market operators, benchmark administrators and clearing and settlement facilities.
The report said the COVID crisis, combined with the 2008 GFC had highlighted the potential for an unforeseen event to “threaten the viability” of Australia’s financial markets, and that ASIC and the RBA should be given increased powers to deal with these risks.
“The regulators currently have a range of powers with respect to FMIs (financial market infrastructures). However, the options available to the regulators to address the potential insolvency of an FMI or other severe threats to its continued operation are very limited,” the report said.
“The proposed reforms are also needed to improve the ability of the regulators to manage such risks ahead of any potential crises, by enhancing the day-to-day regulatory regime and introducing powers to prepare for the orderly resolution of a clearing and settlement facility.
“In addition, the current distribution of regulatory powers does not always reflect the responsibilities of each regulator, and the legislation provides a number of operational powers to the minister (which are currently delegated to ASIC).”
In line with the report’s recommendations, Mr Frydenberg said the government’s forthcoming reform package – announced in the May budget – would improve the RBA and ASIC’s powers to deal with any major issues within a market operator.
The proposed reforms would introduce a crisis management regime allowing the RBA to manage failures within clearing and settlement facilities and a $5 billion standing appropriation to provide temporary funding to facilities to ensure continuity of services.
Following the CFR’s advice to government, the reform package would also strengthen both regulators’ supervisory and licensing powers in relation to FMIs and clarify the power structure between the regulators and the minister in the event of a serious issue.
