Council of Financial Regulators Annual Report – 2001 Appendix D

Main Developments in Regulation/Supervision of the Australian Financial System: 2001


The Basel Committee on Banking Supervision releases a revised and more extensive consultative paper on reform of capital adequacy guidelines for banks. APRA immediately welcomes the proposals as giving depositors better protection against the risks in banking and being flexible enough to apply to a wide range of authorised deposit-taking institutions.

ASIC requests 53 ‘new economy’ companies, which operate in high-tech, dot com or related business sectors, to clarify their financial reporting and disclosure following surveillance of the financial reports and cash flow statements of a larger number of such companies.


ASIC announces tighter guidelines governing financial forecasts and projections in prospectuses, in response to concerns about unreasonable and non-verifiable financial projections based on hypothetical assumptions. This followed a regulatory review of prospectuses issued in 2000.

ASIC announces a major investigation into the financial status of Australia's unlisted solicitors' mortgage investment schemes. The investigation is designed to identify the best steps available to minimise investor loss as well as issues of negligence and misconduct.

ASIC commences a formal investigation into the market disclosure of HIH Insurance Ltd, following concerns that the market was being inadequately informed about the company's trading position. The investigation places particular emphasis on corporate governance, market disclosure and possible insolvent trading.

ASIC announces the results of a campaign that has significantly improved compliance by investment advisers with a fundamental ‘consumer protection’ condition of their licence. In response to ASIC's campaign, a total of 419 advisers will join an approved consumer complaints resolution scheme, known as the Financial Industry Complaints Service (FICS).

ASIC carries out a campaign to examine how life insurance companies train and supervise agents in disability insurance products and looks at the conduct and disclosure of those agents when advising on such products.

ASIC carries out a campaign to examine how life insurance companies train and supervise agents in disability insurance products and looks at the conduct and disclosure of those agents when advising on such products.

APRA launches its new quarterly statistical publication, Insight, aimed at giving readers insight into the condition of Australia's financial institutions and APRA's supervision. The tables and graphs within Insight focus primarily on the financial and risk characteristics – or prudential soundness – of APRA-supervised financial institutions. They emphasise comparisons across institutions, rather than time trends in industry aggregates.


ASIC launches an electronic bulletin that will provide updates on investments, superannuation, insurance and on how to avoid the latest financial scams.

APRA releases further proposals to reform and modernise the prudential supervision of general insurance companies in Australia, updated from earlier draft proposals released in 2000. (In November 2000, the Government had announced that it would be proceeding with amendments to the Insurance Act 1973 necessary to give effect to the new regime.)


Following a decision by the Payments System Board, the RBA ‘designates’ credit card schemes operated in Australia by Bankcard, MasterCard and VISA, as payment systems subject to its regulation under the Payment Systems (Regulation) Act 1998.

ASIC launches a draft ‘Guide to Good Transaction Fee Disclosure for Banks, Building Societies and Credit Unions’, which sets out ASIC's views on disclosure of product selection fees, fee changes, when fees are charged, when a statement is received and fees charged before providing a statement.

ASIC commences investigation into certain issues of market disclosure and governance by NRMA Insurance Group Limited and NRMA Limited.

ASIC launches a revised Electronic Funds Transfer (EFT) Code of Conduct. The revised code is extended to include telephone and internet banking, all credit card transactions (other than those intended to be authenticated by a manual signature) and stored value products such as smart cards, pre-paid telephone cards and digital cash.

APRA announces plans to review the Life Insurance Act 1995. This review also seeks to harmonise and integrate the prudential requirements of friendly societies within this Act.

APRA releases its self-assessment of the prudential supervision of Australian banks against the Basel Committee's Core Principles for Effective Banking Supervision.


ASIC announces how it will facilitate the use of electronic applications in the life insurance and superannuation industries.

The Government reiterates its intention to proceed with the legislative changes needed for implementation of APRA's new prudential supervision framework for general insurance companies, and announces a new (shorter) implementation timetable. APRA hosts an industry seminar to discuss its proposed new framework.

The Government announces a Royal Commission into the collapse of HIH Insurance Group, as well as a package of assistance for policyholders of HIH facing financial hardship.


ASIC releases a second package of policy proposal papers arising from the Financial Services Reform Bill 2001, relating to licensing and approval of codes.

APRA releases its submission on the Basel Committee's consultative paper on proposed changes to the Basel Capital Accord.

APRA releases its submission to the Productivity Commission's National Competition Policy review of the Superannuation Industry (Supervision) Act 1993 and certain other superannuation legislation. The submission outlines key areas where APRA plans to strengthen supervision within the current legislative structure including better information provided to APRA; stricter guidelines on funds' investment portfolios; wider powers for APRA to seek information directly from third-party service providers; reassessment of minimum capital requirements in superannuation; and broader licensing arrangements.


Following ASIC representations, the Securities and Exchange Commission of Thailand launches a crackdown on alleged cold-callers in Bangkok.

APRA and the Australian Taxation Office jointly issue a circular directed at employers that explains their obligation to send employees' voluntary superannuation contributions promptly to the nominated superannuation fund.


Parliament passes the Financial Services Reform Act 2001 (FSR Act).

Parliament passes amendments to the Insurance Act 1973 to give effect to APRA's new prudential supervision framework for general insurance.

APRA releases for industry comment a draft prudential standard on Board composition for all ADIs.


ASIC releases an FSR Act policy proposal paper on licensing and financial requirements.

ASIC issues a notice to unlisted fund managers which, as a result of the events of September 11, suspended applications and redemptions. The notice reminds managers of their obligations to consider the best interests of scheme investors.


The RBA takes action under the Banking (Foreign Exchange) Regulations to block any accounts that might exist in the name of persons or organisations identified by the United Nations and the United States as terrorists or their sponsors.

ASIC releases two guides to assist the industry in making the transition to the new FSR Act regime. ‘Licensing and disclosure: making the transition’ explains how the transitional provisions for financial services licensing and product disclosure work and ‘How do you get an Australian financial services licence?’ explains the ASIC licensing process and the types of licence for which applications can be made.

The Government releases an Issues Paper on ‘Options for Improving the Safety of Superannuation.’

APRA releases a Policy Discussion Paper on two aspects of its framework for the prudential supervision of conglomerate groups that include an ADI – large exposure limits (both intra-group and external) and the measurement of capital adequacy in conglomerate groups.

APRA begins a campaign to remind superannuation trustees of their obligation to lodge annual returns on time, and of the consequences of late lodgement.


ASIC issues six policy statements and one guidance paper on licensing and disclosure matters to assist the industry in understanding the implementation of the FSR Act.

APRA releases the latest versions of its proposed new prudential standards for general insurance companies in Australia. The standards cover capital adequacy, liability valuation, reinsurance arrangements, risk management, assets in Australia and transfers of business.

Reflecting the growing importance of outsourcing in the financial sector, APRA releases for comment a draft prudential standard on outsourcing by ADIs. The draft standard aims to ensure that the Board and management of ADIs have policies and procedures to manage effectively the risks arising from outsourcing business activities.


The RBA releases for public discussion a consultation document on reform of credit card schemes in Australia, proposing standards and an access regime that will promote greater efficiency, transparency and competition in the Australian payments system.

ASIC announces a project to look at disclosure of fees and charges in the product disclosure statements for investment products.

ASIC releases a policy statement that deals with financial resource requirements for financial service providers.

APRA releases for comment four draft revised prudential standards (including their related guidance notes) for ADIs. These standards give effect to the policy framework for prudential supervision of conglomerate groups containing ADIs described in the April 2000 Policy Information Paper and the October 2001 Policy Discussion Paper.