Speech Summary Remarks at FINSIA Regulators Panel

These remarks provide an overview of some current issues relating to the Bank's regulatory responsibilities across three main areas – maintaining the stability of the financial system, ensuring competition and efficiency in the payments system and the prudential supervision of the country's clearing and settlement facilities.

On financial stability, the importance of high-quality data as a basis for good analysis is underlined. There is emphasis on the challenges in understanding current conditions in the housing market given sizable revisions in the commercial banks' reported data on owner-occupier and investor housing loans. In particular, there is discussion of the very large upward revisions over the past six months to the value of reporting outstanding investor loans, and the more recent downward revisions as some borrowers, when faced with a higher loan rate, inform their bank that they are an owner-occupier and so should not pay the higher rate. It is suggested that further reclassifications are expected in the coming months. These issues are said to reinforce the view that the regulatory focus on investor lending has been ‘entirely appropriate’ and it is noted that the Council of Financial Regulators and the ABS are considering what further steps are needed to improve the quality of data.

The speech turns to the Bank's payments systems work and the industry efforts to modernise important aspects of Australia's payments system (allowing payments to be made more quickly and with more information). There is then discussion of the ongoing review of the regulation of the cards payments system, with particular focus on the Bank's work to consider how to manage concerns about excess surcharging on credit cards, and the appropriate level of interchange benchmarks in the card systems.

The third aspect discussed is the Bank's role as the prudential supervisor for central counterparties and securities settlement facilities. Consideration is given to progress in the transition to greater use of central counterparties in global and domestic markets. The speech explains two issues of current focus in this general area. The first is the development of more robust crisis management arrangements for financial market infrastructures. And the second is the work being undertaken to improve cyber resilience. The speech finishes by pointing out that the Bank, as a financial institution, has made its own significant investment to address the risks posed by cyber attacks.

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