ABA claims excessive regulation has limited effect
The Australian Banker's Association (ABA) has urged caution around the introduction of further regulations in the financial system, claiming these often have unintended consequences and do not add to consumer protection.
In its submission to the Financial Systems Inquiry, the ABA stated that it was "sceptical of the need for
ever more regulation" given the high level and strength of regulation already in place.
ABA chief executive Steven Münchenberg said regulators needed to be cautious in proposing new or changed regulations and should assess the impact any change would have on the financial system's ability to serve the broader community.
In its submission, the ABA stated that regulators should be cautious in making changes due to the interconnected nature of the Australian financial system and avoid causing unintended impacts to other parts of the system.
"It is in the nature of complex systems that, when a change occurs in one part of a system, its impact flows through to other parts, often in unexpected ways. Regulators therefore need to accept that virtually any rule change will have unintended consequences.
"Given the costs of regulation, it is vital that before implementing new regulation, regulators have thought through the consequences. Each piece of new regulation is enhanced when there is full consultation with those affected, testing the broader implications of proposed regulation, and when consideration is given to ensuring the best level of regulation is reached," the ABA stated in its submission.
It also claimed that cumulative regulation caused diminishing returns. The benefits of regulation reduced while the costs climbed — but the regulation did not provide parallel benefits or protections to consumers.
The ABA also stated that regulation should not automatically be formulated and enacted when a problem is identified, but that existing regulation should be examined as to why it is not sufficient and that breaches should be identified as non-compliance or non-enforcement of existing laws, rather than indicating a flaw in the regulatory regime.
However in the event regulations are required, they should be targeted to those who are not compliant with the cost of regulation, and enforcement should be proportionally higher for those who are non-complying.
AUTHOR
Jason Spits
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