Tuesday, September 15, 2009
Posted by D. Daniel Sokol
Shyam Singh Bhati explains Competition and Consumer Regulation for Australian Banks.
ABSTRACT: This paper provides an overview of the legal and regulatory framework that affects banks and financial institutions in Australia. As a first step, a description of the regulatory responsibilities of the major financial regulators, such as Reserve Bank of Australia (RBA), Australian Prudential Regulatory Authority (APRA), Australian Securities and Investment Corporation (ASIC) and Australian Competition and Consumer Commission (ACCC), are described. Next, the legislation such as, Banking Act, 1959, Financial Sector (Shareholdings) Act, 1998 and Financial Sector (Business Transfer and Group Structure) Act, 1999, applicable to banks are discussed. After that, the role of industry regulatory initiatives, such as Banking Ombudsman Scheme and Code of Banking Practice, in providing services to customers are discussed. Lastly, various requirements of the Code of Consumer Practice, as applicable to Australians, are discussed and an opinion is provided on the effectiveness and functioning of the Code and its ability to provide protection to the Australian consumer. It is concluded that the financial regulatory institutions in Australia have been successful so far in avoiding any systemic risk to the Australian Financial System. Industry initiatives, such as Banking Ombudsman and Code of Banking Practice have fallen short of providing the mechanisms necessary to address the consumer issues, as they tend to favor the industry players who fund these organizations.