21 October 2011

Financial Market Infrastructure Reform Proposals

Today I announce new consultations on reforms to the oversight of Australia's financial markets, ensuring they continue to protect the interests of investors, businesses, and market participants, and further strengthen the Australian economy.

The Council of Financial Regulators (the Council) will consult for a six-week period on proposals to enhance the supervision of our critical financial market infrastructure.

The proposals include new powers to require certain systemically-important market infrastructure to have key aspects of their operations located in Australia and overseen by 'fit and proper' persons, as well as increased power for regulators to intervene in the event of infrastructure experiencing substantial difficulties.

Our strong, well-regulated financial system helped Australia withstand the worst of the global financial crisis and it's one of the reasons why we're better positioned than almost any other country to deal with the current global instability.

In April, I asked the Council to establish a working group to consider reforms to strengthen our regulatory framework. This followed my decision to prohibit the acquisition of ASX Limited by Singapore Exchange Limited, based on unambiguous and unanimous advice from the Foreign Investment Review Board that the proposal was contrary to the national interest.

My comprehensive statement of reasons included, among other fundamental concerns, the strong advice of our regulators that no transaction should be allowed to compromise Australia's full regulatory sovereignty over our critical financial market infrastructure.

Our regulators advised that reforms were necessary to ensure we can preserve the integrity of our financial infrastructure and the strong ability of our supervisors to maintain robust oversight in all market conditions, including in the event of any future foreign ownership or alliance of the ASX.

The consultation paper released today provides stakeholders with the opportunity to comment on proposals that the Council is now considering.

The Council, whose members include the Governor of the Reserve Bank, the Secretary to the Treasury, and the Chairs of both APRA and ASIC, will then finalise its advice to the Government to inform any necessary legislative amendments.

Stakeholders will have a further opportunity to comment on any exposure draft legislation before introduction.

The Gillard Government acted decisively to secure Australia's financial system during the global financial crisis. With volatility in global capital markets expected to continue for some time, it is critical we work methodically on long-term reforms that keep our financial market infrastructure strong and secure.

The consultation paper is available on the Treasury website at www.treasury.gov.au.