Financial system inquiry interim report: the response

On July 15^th, the Financial System Inquiry, chaired by Mr David Murray AO, released its interim report into the objectives of the financial system and the principles that should guide its development.

It discusses the financial system from nine perspectives and makes 28 observations on how system is currently working – and a range of options for change.

The Committee has called for submissions on the report; here are some of the published opinions thus far.

Customer Owned Banking Association

“COBA is disappointed that the interim report makes no attempt to estimate the size of the funding cost advantage enjoyed by major banks due to the perception of being too big to fail.”

“We welcome the report?s observation that more could be done to emphasise competition in the performance of regulators such as APRA. We are also very supportive of the report?s finding that ?fairness is an important policy objective of the financial system?. The customer-owned sector strongly endorses the view that ?fairness involves fair treatment by applying the concepts of integrity, honesty, transparency and non-discrimination which go to building trust in the financial system.” COBA CEO Louise Petschler.

KPMG

“We are disappointed that the Inquiry has effectively deferred all major tax issues to the white paper process. Just 14 pages out of 460 are devoted to tax, yet there are many financial services–specific tax subjects which we feel the Inquiry could reasonably have been expected to give direction on. Some of these issues will not be given the degree of attention needed in a broader white paper.” Jenny Clarke, KPMG Financial Services Tax Partner

ASFA

The interim report from the Financial System Inquiry (FSI) recognises that superannuation is playing an increasingly important role in Australia’s financial system, according to the Association of Superannuation Funds of Australia (ASFA).

““The report recognises the importance of developing policies that consider the ?drawdown? or retirement phase, as well as the accumulation phase of superannuation. Taking a ‘whole-of- life’ approach to superannuation policy will help ensure that these phases are managed in a way that delivers the best outcomes for the Australian community.”  ASFA CEO Ms Pauline Vamos.

Financial Services Council

“Consumers need certainty and stability in policy settings to have trust and confidence in the system. The inquiry has appropriately recognised this as a critical element in superannuation policy. The MySuper system, although less than 12 months old, has already seen a reduction in superannuation fees. As the FSI report suggests, MySuper needs more time to demonstrate that it can deliver on its objectives.”  John Brogden, CEO of the FSC

Australian Bankers Association

“Recognition that the banking sector, while concentrated, remains competitive is welcomed, as is the focus on possible options to improve competition further.”

“The need to balance the important role technology is going to play in the future of banking, and the benefit it brings to customers, with managing potential risk to customers and the financial system is also supported.” Steven Münchenberg, Chief Executive of the ABA

Consumer Action Law Centre

“We agree that much of the current disclosure regime produces complex and lengthy documents that don?t enhance consumer understanding of financial products and services. Disclosure has its place and can work where it is simple, clear and relevant. Disclosure should clearly warn consumers about key product attributes and risks, and provide information based on how consumers use financial products.

The introduction of disclosures on credit card statements informing how long it will take to repay a credit card when paying only the minimum balance has coincided with improved repayment rates. This suggests clear, simple and relevant disclosure works, and could be extended to other areas. Consumer Action Law Centre CEO, Gerard Brody.