20 December 2013
Media Release - #37, 2013

Financial System Inquiry

Today I am announcing the final terms of reference for the Government’s Financial System Inquiry and the appointment of four members to serve on the Inquiry panel which is being chaired by Mr David Murray AO.

The following distinguished representatives of the finance, business and academic community have accepted my invitation to be part of this root and branch review of the nation’s financial system:

  1. Professor Kevin Davis;
  2. Mr Craig Dunn;
  3. Ms Carolyn Hewson AO; and
  4. Dr Brian McNamee AO.

The terms of reference have been finalised after input from a number of organisations and individuals during the consultation period.

There was broad support for the draft terms of reference released last month. As a consequence, the Government has made only minor changes to this document.

The next step for the Inquiry will be to receive submissions in line with the terms of reference. Submissions will open in early January and close at the end of March.

In framing submissions, stakeholders are asked to consider the impact of changes to Australia’s financial system since the 1997 Wallis Report, identify factors most likely to influence the future development of the system, the principles which should underpin the system, and discuss options for responding to them.

I have asked the Inquiry to release an interim report by mid-2014. There will be a second round of submissions before the Inquiry makes its final report to the Government, expected to be delivered to the Government by November 2014.

I will be announcing an international advisory panel early in the new year.


Attachment A: Biographies of Additional Members

Professor Kevin Davis (Melbourne) is currently a Professor of Finance at the University of Melbourne, a Research Director at the Australian Centre for Financial Studies and a Professor of Finance at Monash University.  Professor Davis is also a part time member of the Australian Competition Tribunal and Co-Chair of the Australia-NZ Shadow Financial Regulatory Committee.

Mr Craig Dunn (Sydney) is stepping down from his role as Chief Executive Officer and Managing Director of AMP in January next year after 14 years’ service with the company.  Mr Dunn led AMP through the Global Financial Crisis and has extensive experience in the financial sector. He is a member of the Australian Government’s Financial Services Advisory Committee and executive member of the Australia Japan Business Co-operation Committee.

Ms Carolyn Hewson AO (Adelaide) served as an investment banker at Schroders Australia for 15 years.  Ms Hewson has over 30 years’ experience in the finance sector and currently serves on the boards of BHP Billiton Ltd, Stockland and BT Investment Management Ltd and is Chair of the Westpac Foundation.  Ms Hewson was made an Officer of the Order of Australia for her services to the YWCA and to business.

Dr Brian McNamee AO (Melbourne) served as the Chief Executive Officer and Managing Director of CSL from 1990 to 30 June 2013.  During that time, CSL transitioned from a government-owned enterprise to a global company with a market capitalisation of approximately $30 billion. He has extensive experience in the biotech and global health care industry. Dr McNamee was made an Officer of the Order of Australia for service to business and commerce.


Attachment B: Terms of Reference

Objectives

The Inquiry is charged with examining how the financial system could be positioned to best meet Australia’s evolving needs and support Australia’s economic growth.

Recommendations will be made that foster an efficient, competitive and flexible financial system, consistent with financial stability, prudence, public confidence and capacity to meet the needs of users.

Terms of reference

  1. The Inquiry will report on the consequences of developments in the Australian financial system since the 1997 Financial System Inquiry and the global financial crisis, including implications for:
    1. how Australia funds its growth;
    2. domestic competition and international competitiveness; and
    3. the current cost, quality, safety and availability of financial services, products and capital for users.
  2. The Inquiry will refresh the philosophy, principles and objectives underpinning the development of a well-functioning financial system, including:
    1. balancing competition, innovation, efficiency, stability and consumer protection;
    2. how financial risk is allocated and systemic risk is managed;
    3. assessing the effectiveness and need for financial regulation, including its impact on costs, flexibility, innovation, industry and among users;
    4. the role of Government; and
    5. the role, objectives, funding and performance of financial regulators including an international comparison.
  3. The Inquiry will identify and consider the emerging opportunities and challenges that are likely to drive further change in the global and domestic financial system, including:
    1. the role and impact of new technologies, market innovations and changing consumer preferences and demography;
    2. international integration, including international financial regulation;
    3. changes in the way Australia sources and distributes capital, including the intermediation of savings through banks, non-bank financial institutions, insurance companies, superannuation funds and capital markets;
    4. changing organisational structures in the financial sector;
    5. corporate governance structures across the financial system and how they affect stakeholder interests; and
    6. developments in the payment system.
  4. The Inquiry will recommend policy options that:
    1. promote a competitive and stable financial system that contributes to Australia’s
      productivity growth;
    2. promote the efficient allocation of capital and cost efficient access and services for users;
    3. meet the needs of users with appropriate financial products and services;
    4. create an environment conducive to dynamic and innovative financial service providers; and
    5. relate to other matters that fall within this terms of reference.
  5. The Inquiry will take account of the regulation of the general operation of companies and trusts to the extent this impinges on the efficiency and effective allocation of capital within the financial system.
  6. The Inquiry will examine the taxation of financial arrangements, products or institutions to the extent these impinge on the efficient and effective allocation of capital by the financial system, and provide observations that could inform the Tax White Paper.
  7. In reaching its conclusions, the Inquiry will take account of, but not make recommendations on the objectives and procedures of the Reserve Bank in its conduct of monetary policy.
  8. The Inquiry may invite submissions and seek information from any persons or bodies.
  9. The Inquiry will consult extensively both domestically and globally. It will publish an interim report in mid-2014 setting out initial findings and seek public feedback. A final report is to be provided to the Treasurer by November 2014.