House of Representatives Committees

Standing Committee on Economics, Finance and Public Administration

Reports, inquiries and other activities

Reviews of the 1995-96 annual reports of the Reserve Bank of Australia, Australian Securities Commission and the Insurance and Superannuation Commission

Government response

(Tabled on 22 June 1999)

This document has been scanned from the original government response. It may contain some errors.

GOVERNMENT RESPONSE TO THE HOUSE OF REPRESENTATIVES STANDING COMMITTEE ON FINANCIAL INSTITUTIONS AND PUBLIC ADMINISTRATION ON ITS REVIEWS OF THE 1995-96 ANNUAL REPORTS OF THE RESERVE BANK OF AUSTRALIA, AUSTRALIAN SECURITIES COMMISSION AND THE INSURANCE AND SUPERANNUATION COMMISSION

Recommendation 1 of the Report recommended:

"That the Australian Prudential Regulatory Authority be required to appear before the House of Representatives Standing Committee on Financial Institutions and Public Administration at a public hearing once a year to report on prudential supervision of the financial services industry"

The Treasurer stated in his second reading speech when introducing the Financial System Reform legislation into Parliament that APRA will report to Parliament annually, and that it will be available to appear before the relevant parliamentary committees. This is consistent with the present practices of the ISC, RBA and ASC, and it is appropriate that the new prudential regulator continue this reporting requirement.

Recommendation 2 of the report stated that:

"In order to encourage private investment in small business enterprises, the Treasurer review the rules governing the issue of prospectuses with a view to reducing the costs and complexity of preparing a prospectus for small and medium companies."

In October 1997, as part of the Government's Corporate Law Economic Reform Program, the Treasurer announced reform of the rules governing fundraising by business. The reforms include a specially designed package aimed at facilitating capital raising by small to medium enterprises. Reforms are also proposed to facilitate the use of shorter prospectuses and, where appropriate, profile statements providing basic information.

The Report also raised several issues in respect of which there have since been relevant recent developments, which the Government would like to draw to the Committee's attention.

The Report notes the concern of the Governor of the RBA regarding the Wallis Inquiry proposals to transfer responsibility for the prudential regulation of banks to APRA while leaving the RBA with responsibility for financial system stability. The Treasurer addressed these concerns in his statement of 2 September 1997 (Press Release No. 102), noting that both organisations will operate closely, and that there will be provision for:

the RBA to have two ex-officio members on the APRA Board;

full information exchange between the two organisations;

a bilateral committee, chaired by a deputy governor of the RBA, to coordinate information exchange, reporting arrangements and ongoing cooperation between the two agencies; and

RBA participation in APRA inspection teams.

The Report raises issues arising from Crown immunity in relation to the privatisation of Commonwealth and State government enterprises. The removal of governmental immunity from the fundraising provisions of the Corporations Law was announced by the Treasurer as part of the Corporate Law Economic Reform Program.

The Report indicates that additional legislation arising from the Corporate Law Simplification Task Force has not been brought forward following the change of government. Since that time, Parliament has enacted the Company Law Review Act which adopted a number of reforms originally arising from the former Simplification Task Force. The Act makes a number of important reforms to the Corporations Law provisions dealing with share capital, company incorporation and registration, financial statements and annual returns.

The Report also discusses issues arising from the demutualisation of the Australian Stock Exchange (ASX). The Corporations Law Amendment (ASX) Act 1997,which has been passed by Parliament since the Committee's Report was finalised, provides the legislative framework to support the demutualisation of the ASX, which took place on 13 October 1998.