The Morrison Government has released the report of the Council of Financial Regulators’ (CFR) review into Financial Market Infrastructure (FMI) Regulatory Reforms.
The release of the CFR’s report follows the announcement in the 2021-22 Budget that the Morrison Government will, in line with the report’s recommendations, introduce an FMI regulatory reform package to ensure financial regulators have sufficient powers to intervene to manage a crisis and pre‑emptively identify and manage risks.
FMIs including financial markets, clearing and settlement facilities, benchmark administrators and derivative trade repositories play a critical role in the operation of financial markets and the financial system more broadly, supporting $18 trillion in securities transactions and $185 trillion in notional value of derivatives transactions every year. FMIs enable businesses, investors, and governments to raise capital, access liquidity, manage risk and invest funds.
Consistent with the CFR’s recommendations, the Government’s reform package will:
- introduce a crisis management regime that will allow the Reserve Bank of Australia (RBA) to manage a failure at a domestic clearing and settlement facility. These powers will be supported by a $5 billion standing appropriation, with Ministerial agreement, to provide temporary funding to a CS facility if that were necessary to ensure continuity of services;
- enhance the supervisory and licensing powers of the Australian Securities and Investments Commission and the RBA in respect of FMIs; and
- streamline and clarify certain regulatory powers.
The CFR’s report builds on extensive consultation by the Government and CFR. This reform initiative also delivers on the recommendations the Financial System Inquiry and the International Monetary Fund, and is consistent with existing crisis management arrangements applying to authorised deposit-taking institutions and general insurers.
The report and CFR’s response to consultation can be found on the CFR website.