Fragmentation risk in FSI implementation
There is a significant risk of fragmentation when the time comes to implement the recommendations posed in the Financial System Inquiry (FSI), according to a regulation expert at Minter Ellison.
The law firm's partner Richard Batten argued that with no one body responsible for implementation, one could see a clash between the different bodies
"Obviously a lot of the recommendations are directed to the Federal Government but a number of the recommendations are also directed at the individual regulators, many of which are already starting to act on their own initiative in anticipation of the discussions," Batten said.
"With no one person responsible for ensuring the implementation of the recommendations, there's a risk that different actors will pick and choose what they want to do."
Bratten said there is interdependence between the different recommendations in the Inquiry, and individual actors like regulators and other bodies cherry picking individual initiatives for reform and discarding others without looking at the industry holistically will mean the industry will not enjoy the full benefits of reform.
"There is concern that no one party is geared to take on the responsibility of deciding in a coherent way which ones of those recommendations should go ahead and which ones shouldn't," he said.
Batten also worries about the new duties for issuers and distributors of financial products related to the method and design of distribution. This includes the corporate regulator's new temporary product banning ability, where they can pause new product development if they have concerns about it.
He believes issuers will think twice about launching a new product due to the risk of "getting that wrong" and the associated costs, whether monetary or reputational.
AUTHOR
Malavika Santhebennur
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