Regulator gets new powers to fight future bank crisis

The federal government has unveiled legislation that is designed to protect the financial system during a bank collapse.

Under the legislation, APRA, which regulates banks and insurers, will be given new crisis management powers.

The government said APRA will now have:

• clear powers that enable APRA to set requirements on resolution planning and ensure banks and insurers are better prepared for a crisis
• an expanded set of crisis resolution powers that equip APRA to act decisively to facilitate the orderly resolution of a distressed bank or insurer

Hope for the best, plan for the worst

Treasurer Scott Morrison said one of the lessons of the GFC was that regulators need “powerful, flexible and timely tools” to resolve financial institutions in distress.

“The prudent time to strengthen crisis powers is when the financial system is healthy,” he said.

“The government stands ready to do the heavy lifting required to ensure the wellbeing of the financial system continues into the future.”

Government responds to inquiry

In 2015, as part of its response to the Financial System Inquiry, the government promised to provide regulators with clear powers in the event a prudentially regulated financial entity or financial market infrastructure fails.

The result is the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017.

This new bill includes amendments to six existing acts:

• Banking Act 1959
• Insurance Act 1973
• Life Insurance Act 1995
• Australian Prudential Regulation Authority Act 1998
• Payment Systems and Netting Act 1998
• Financial Sector (Business Transfer and Group Restructure) Act 1999

Interested parties have until 8 September to make submissions about the new bill.

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