Transcript of Question & Answer Session Remarks at FINSIA Regulators Panel

I think an enormous amount of material there for us to all to digest but a lot of common themes as well and it's fantastic to see all regulators talking about forward looking, talking about innovation and the way that regulation can actually support innovation in our sector as well. I'm going to ask a couple of questions just to kick things off, but I know there'd be many in the audience that would be keen to ask a question. So if you can prepare those and I'm sure some roving microphones will be coming around shortly.

But just to kick off a question to perhaps all the panel to start with and it's obviously topical given the Government's just come out with their response to the Financial System Inquiry, but now that the approach and action plan has been delivered, what sort of legacy do you think the Inquiry is actually going to leave our industry? I'm happy to kick off anywhere there. Philip?

Thanks. I think the other observation I would make is that the Inquiry came to the conclusion that the current system was working well, it was a point that Lyn made right at the start and that many other countries have had kind of very difficult experiences with financial regulation over the past decade or so and we have not, and I think it's something we can gloss over too easily when you think about the changes that the Inquiry talked about. Our current system actually works well and we should take considerable comfort from that. There's an increased focus on resilience in the banking system, efficiency of the super system and innovation in the financial sector I think are all spot on and these are areas of kind of continual improvement. But in a system that's actually working pretty well.

Great thank you, I wouldn't mind developing or trying to tease out a little bit about a theme that we heard all three of you touch on that's really around innovation. Greg you talked about the new innovation hub that ASIC's established to help FINTEC start-ups navigate the regulatory system and reduce red tape. And I think we'd be keen to hear from all of you actually how you're thinking about innovation, the implications of the change that you're seeing with the rise of FINTEC, and particularly I suppose the role of the regulator, you know we heard I think from you Greg this sort of calibrated approach as an organisation grows, but I'd be interested to sort of tease out perhaps a few more comments around how you propose to regulate new entrants as well as existing market participants as they try to innovate as well.

Well as I said I think that in a digital age I think the way laws apply and regulation applies we need to rethink a little bit because you know in the digital age you have a lot of innovation occurring some of it may take off, some of it may not and I think they've almost got to have an environment where almost you know you do allow things in the sandbox to evolve with sort of perhaps a limited approach. As I said you know probably too small to really care so basic – a basic approach and then as they grow you think a more evolved approach and I do think as I said a more graduated approach is appropriate. I do think that we think about things like lock chain that are evolving and how you know what that might do as I said to clearing settlement exchanges itself, you know, flexibility and agility are going to be really important and especially I think every country – every major country in the world at the moment it's a competition and the digital environment. So if you want to actually not just follow but lead the world I think you're going to have to be a lot more flexible and adaptable to make sure your economy can respond, but again make sure that you fundamentally make sure that you maintain trust and confidence in investors. And I said one of the things that I think you've got to take some of the elements of digitisation like what I call customer regulation that feedback loop, perhaps you can use some things in the digital environment perhaps to offset your traditional things you may think about. So I do think it is a new way of thinking actually and it's also global it's not just – you need to be seeing what other countries are doing because the internet is global so it's important that you actually work – you watch and you work collaboratively with other countries is also important, so I think it's just part of that evolution that is occurring at the moment.

Philip would you like to add something to that?

Well I just reinforce this idea that this graduated approach must be kind of really central to how we all approach this. You talk to people in the industry and some people have fantastic ideas of how this might develop, you talk about kind of the block chain, the distributor ledger and you know in 10 years' time this could be reshaping everything. So we've got to be open to that possibility.

Exactly.

And we've got to make sure that the regulations we put in place don't preclude something that might ultimately to be to our collective advantage, so kind of this graduated approach. And this is something in the Payment System Board at the Reserve Bank is very keenly aware of, the approach to regulation is only to regulate if there is a clear public policy case that can't be solved through other means. The other observation I'd make about innovation, this comes from my experience in the payment system, the co-ordination is often required for innovation and the co-ordination amongst competitors, so we need kind of mechanisms to do that without damaging competition and I think in the payment system we've seen some progress there with the Australian Payments Council developing, but I think that applies in other areas as well. So we need not just get carried away with the possibility of new ideas but actually how do we get industry to implement new ideas cost effective and effective basis.

That's why I think the innovation hub is very important, that you're actually talking to innovators and saying well look actually one of the things about our innovation hub is we almost say to them don't go with lawyers and sort of create something and then come to us, come and talk to us early on because often these people don't have a lot of capital, so we actually are trying to encourage them you know try and help them develop their ideas within you know the frame work. I think I agree with Phil.