Council of Financial Regulators Annual Report – 1998 1. Council of Financial Regulators

The Council of Financial Regulators is a co-ordinating body for Australia's main financial regulatory agencies: the Reserve Bank of Australia (RBA), which chairs the Council; the Australian Prudential Regulation Authority (APRA); and the Australian Securities and Investments Commission (ASIC). Until its responsibilities transfer to APRA, the Australian Financial Institutions Commission (AFIC) also participates in the Council.

The Council's role is to contribute to the efficiency and effectiveness of financial regulation by providing a high-level forum for co-operation and collaboration among its members.

The Council was established in 1998 as the successor to the Council of Financial Supervisors (CFS). The CFS had been formed in 1992 to improve co-ordination and communication among the then major financial regulators: the RBA; the Insurance and Superannuation Commission (ISC); the Australian Securities Commission (ASC); and AFIC. The CFS had met about once every quarter and had its final meeting in February 1998. It produced five Annual Reports covering its activities and developments in the financial system and in regulation/supervision.

The new Council forms part of wide-ranging changes to Australia's financial regulatory structure in 1998, prompted by the recommendations of the Financial System Inquiry (the Wallis Committee). The changes included the establishment of a single prudential regulator (APRA), the establishment of a separate regulator (ASIC) to deal with market integrity and consumer protection issues across the financial system, and revised responsibilities for the RBA, involving its withdrawal from prudential supervision of banks but more extensive regulatory powers in the payments system.

Within this new structure, the Inquiry recommended the establishment of the Council to carry forward the work of its predecessor. The Inquiry saw the Council as ‘the collaborative dimension of the regulatory agencies' activity’, not as a separate body, with its strength coming from the commitment of its members to co-operate closely. The Inquiry proposed that the Council's membership should not be extended to other agencies or representatives, and that the Council be a non-statutory body to help avoid any suggestion that it had regulatory functions separate from those of its members. The Inquiry also recommended that, like the CFS, the Council's structure and administrative arrangements be determined by its members. The Government accepted the Inquiry's recommendations in this area.

Membership of the new Council comprises two representatives – the chief executive and a senior representative – from each of the three regulatory agencies. The Chairman is the Governor of the RBA and the RBA provides the Council Secretariat. The Council met for the first time in May 1998, and has agreed a new charter, administrative arrangements and work program (see box below and Appendix A).[1]

The Council is pleased that the Inquiry and the Government endorsed the previous CFS ‘model’ – that is, informal arrangements that provide a flexible, low-cost approach to regulatory co-ordination among the main financial system regulators. As the CFS noted in its September 1996 submission to the Inquiry, that model of relative informality and flexibility is well-suited to dealing effectively with the rapid change in Australia's financial system, while confining membership to the main regulatory agencies enhances its operational efficiency. The new arrangements maintain the independence of the Council and, in its view, provide an appropriate level of accountability.

Council Charter

The Council of Financial Regulators aims to facilitate co-operation and collaboration among its members, the main regulators of the Australian financial system – the Reserve Bank of Australia, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. Its ultimate objective is to contribute to the efficiency and effectiveness of regulation.

The Council provides a forum for:

  • sharing information and views among its members, and liaison with other regulators and agencies;
  • harmonising regulatory and reporting requirements, paying close attention to the need to keep regulatory costs to a minimum;
  • identifying important issues and trends in the financial system, including the impact of technological developments; and
  • co-ordinating regulatory responses to actual or potential instances of financial instability, and helping to resolve any issues where members' responsibilities overlap.

Council Activities in 1998

The major focus for the Council over the past year has been to assist in bedding-down Australia's new financial regulatory framework. A particular interest has been the arrangements for co-operation and information-sharing between members. Chapter 2 outlines the new regulatory structure, highlighting the role of the three regulatory agencies and how their activities are co-ordinated.

Chapter 3 discusses other important issues on the Council's agenda. On the domestic front, dealing with the Year 2000 problem is a priority for each Council member. The Council itself has been keen to encourage disclosure of Year 2000 preparations in the Australian financial sector and has set up a Year 2000 ‘co-ordinators group’ amongst its members to co-ordinate Year 2000 initiatives and international commitments.

On the international front, crises in emerging markets over the past year or more, which have at times threatened global financial and economic stability, have led to a raft of proposals for improving domestic regulatory structures and international regulatory co-operation, under the general rubric of a new ‘international financial architecture’. Individually, Council members are playing active roles in this debate in various international gatherings. The Council provides a forum for discussing reform proposals, particularly those which raise cross-jurisdictional issues in Australia, with the aim of improving co-ordination and avoiding duplication. The Council has established an ‘international officers group’ to keep in contact with each other in order to co-ordinate Australian participation in international fora. The Council's other main area of interest is developments in the supervision of financial conglomerates – in particular, progress by the Joint Forum on Financial Conglomerates.

Appendices to the Report provide further background information on the Council, on the main types of financial institutions in Australia and on recent developments in the regulation/supervision of the Australian financial system.

The Council wishes to acknowledge the key contribution made by Ms Rayne de Gruchy, former AFIC Executive Director, who has recently left the Council.


During the transition to the new financial regulatory framework, the Council has been meeting in an interim configuration comprising representatives of the new and existing regulatory agencies. [1]