FSI report canvasses regulatory funding changes

The Financial Systems Inquiry (FSI) interim report has signalled its panellists were keenly listening to the pleas of the Australian Securities and Investments Commission (ASIC) for a more reliable, user-pays regulatory funding regime. 

The interim report, released today, has canvassed the idea of both ASIC and the Australian Prudential regulation Authority being able to move to “a more autonomous budget and funding process”. 

Dealing with the regulatory settings, the FSI report observes that, “Australia generally has strong, well-regarded regulators, but some areas of possible improvement have been identified to increase independence and accountability”. 

“Strong, independent financial regulators are crucial to the efficient, stable, fair and accessible operation of the financial system. However, regulators also require robust accountability mechanisms that provide appropriate checks and balances,” the interim report said. 

It said that submissions had identified areas of improvement in relation to operational and budgetary independence. 

“Current funding models for APRA and ASIC diverge from best-case funding models for financial regulators. In particular, the current funding models potentially could be improved through increasing the certainty of year-to-year funding,” it said. 

“Although Australian financial regulators are subject to a range of existing accountability mechanisms, the Inquiry recognises there is room to strengthen accountability mechanisms, particularly in light of proposals to increase independence,” the interim report said. 

It said that, on this basis, it would value views on the costs, benefits and trade-offs of the following policy options or other alternatives: 

• No change to current arrangements. 
• Move Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulatory Authority (APRA) to a more autonomous budget and funding process. 
• Conduct periodic, legislated independent reviews of the performance and capability of regulators. 
• Clarify the metrics for assessing regulatory performance. 
• Enhance the role of Statements of Expectations and Statements of Intent. 
• Replace the efficiency dividend with tailored budget accountability mechanisms. 
•  Improve the oversight processes of regulators.