Thank you for inviting me here today. I very much appreciate the opportunity to meet face to face with members of the financial services industry.
In my remarks today I hope to cover what I understand to be some of the major areas of interest to you. I also want to outline some of the Government’s thinking in relation to these important matters.
Firstly, I would like to acknowledge the important role that credit unions play in the Australian financial system.
Credit unions not only provide competition for the four major nationwide banks in the provision of financial services to households but also play a major part in the provision of services to rural and regional Australia.
More broadly, the authorised deposit-taking sector (of which credit unions form a part) constitutes a significant part of the financial system. At end June 2004, there were 247 authorised deposit-taking institutions (ADIs) holding total assets of approximately $1.3 trillion on their domestic books.
The four major banking groups account for some 65 per of total ADI assets, the remaining banks, credit unions and building societies comprising the remainder.
Financial Services Reform
The Government recognises the importance of all players in the financial sector by continuing to promote a competitive banking system which delivers the best services and outcomes to Australian consumers and small business.
Shortly after coming to office, the Government undertook a major review of the financial sector (the ‘Wallis’ report). This review resulted in fundamental reforms to improve the efficiency and competitiveness of the sector.
Key elements of the Government’s approach to FSR have been to encourage the participation of new and smaller players on a more ‘level playing-field’ and enable consumers to shop around between service providers.
The financial sector reforms (FSR) which the resulted from the Wallis report are now largely contained in Chapter 7 of the Corporations Act. In my view, they have, on the whole, been welcomed and accepted by the Australian financial services industry.
The Government acknowledges however, that there are some parts of FSR which could work more efficiently: a number of these areas were identified in the Government-commissioned Financial Sector Advisory Council (FSAC) report on industry experience with the FSR legislation. In preparing the report, FSAC took account of the views of CUSCAL and other relevant industry stakeholders.
I want to state to you clearly today that I am committed to ensuring that the FSR regime operates as effectively as possible.
As such, I am in the final stages of preparing a paper which proposes a number of refinements to FSR which I believe will make it more responsive to the needs of both industry and consumers.
The proposals paper will be released for public consultation in the near future. I intend to oversee a process of consultation with industry and consumer representatives on the proposed refinements. The consultation process will include (in addition to the normal written submission process) a series of stakeholder “roundtables”.
I want to ensure that all industry players, both large and small, get the opportunity to air their views.
I will be interested to hear CUSCAL’s comments on the proposals put forward.
I am confident that with ongoing dialogue, we can ensure that the FSR disclosure requirements, and for that matter, all aspects of the FSR framework, operate more fully as intended.
Members’ registers
Changing tack, the Government is aware of the credit unions’ security concerns about the current rules under the Corporations Act which govern access to credit unions’ registers of members. I know this issue is of particular concern to credit union members who belong to the Armed Forces and the Police.
Currently, officers of the Treasury are engaged in intensive consultation with the Department of Defence and the Australian Federal Police on this issue. The Government is committed to reviewing this issue with a view to identifying the best way forward.
Closing remarks
While the ADI sector has benefited from favourable conditions over the last decade, it is important that the industry is well prepared for potential movements and changes not just in the Australian economy but in the broader worldwide economic environment.
Globalisation, convergence and technological change are three important forces that continue to drive the evolution of the financial system.
There is a constant need for policy review and for development, discussion and regulatory outcomes to keep pace with these continuously changing forces.
Our mutual challenge as government and key industry players is together, to take these changes head-on, with a view to ensuring continuing economic prosperity for all.
Thank you.