Michaelia Cash (WA, Liberal Party, Minister for Jobs and Innovation) Share this | Hansard source

I rise to sum up the debate on the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017. I thank senators for their contributions to the debate.

The robust economic management and effective regulatory reform undertaken by the Howard government prepared us for the impact of the global financial crisis. Australia managed to avoid the devastating impact felt overseas, but we cannot rest on our laurels. Successive reviews, including the Murray financial system inquiry, have made the case that our crisis management powers need to be strengthened.

The lessons from the international experience of the global financial crisis have taught us that regulators need powerful, flexible and timely tools to resolve financial institutions in distress. Even though APRA, the Australian Prudential Regulation Authority, has a reasonable toolkit to deal with these crises, there are deficiencies that need to be addressed to ensure it has the right tools available, should the need arise.

The bill before the Senate has two core themes: resolution planning before a crisis and resolution powers managing a crisis. The first core theme, resolution planning, refers to the process of banks and insurers working with APRA to ensure that they are ready for stress events. While APRA puts considerable effort into resolution planning, the legislative framework does not give APRA clear powers to make prudential standards for resolution. The bill addresses this shortcoming. As a result of the amendments in this bill, there will be a substantial reduction of the impact on the wider financial system and of the cost to taxpayers of a stress event.

The second core theme, resolution powers, refers to the tools that APRA can use to deal with distressed institutions and their groups. This bill strengthens APRA's toolkit by making amendments to:

enhance APRA's statutory and judicial management regimes—

which apply to a bank or insurer and their group companies—

to ensure their effective operation in a crisis;

enhance the scope and efficacy of APRA's existing directions powers—

which require banks and insurers to address prudential issues;

improve APRA's ability to implement a—

compulsory transfer of a business of a regulated entity;

ensure the effective conversion and write-off of capital instruments to which the conversion and write-off provisions in APRA's prudential standards apply;

enhance stay provisions and ensure that the exercise of APRA's powers does not trigger certain rights in the contracts of relevant entities within the same group;

enhance APRA's ability to respond when an Australian branch of a foreign regulated entity (foreign branch) may be in distress;

enhance the efficiency and operation of the Financial Claims Scheme and ensure that it supports the crisis resolution framework; and

enhance and simplify APRA's powers in relation to the wind-up or external administration of regulated entities under the Industry Acts, and other related matters.

In totality, these amendments will significantly strengthen APRA's capabilities as a resolution authority, accompanying its traditional core role as a prudential supervisor. They will ensure that Australia keeps up with international best practice for crisis management. While no-one wants to see the day that a bank or insurer is in distress, through this bill we are taking important steps to safeguard the financial system for the wellbeing of the people of Australia, and I commend the bill to the Senate.