The Federal Government will introduce reforms to the regulation of financial market infrastructures (FMI), by giving more power to the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA).
The reforms were recommended by the Council of Financial Regulators (CFR), which included enhancements to the licensing regimes for FMIs, and stronger supervision and enforcement powers for the regulators, ASIC and the RBA.
FMIs facilitate trading in Australia’s capital markets and included financial market operators, benchmark administrators, clearing and settlement (CS) facilities and derivative trade repositories.
The reforms also included crisis management and resolution powers over Australian CS facilities.
In 2019, the CFR consulted on a range of measures to enhance the regulation and released the ‘Financial Market Infrastructure Regulatory Reforms’, which led to the CFR providing the recommendations to the Government.
Following the consultation process, the CFR provided advice to the Government recommending a package of reforms so that the Australian financial system was supported by resilient, efficient and stable FMIs.
Treasurer Josh Frydenberg said the release of the CFR report followed the announcement in the 2021-22 Budget that the Morrison Government would introduce an FMI regulatory reform package to ensure financial regulators had sufficient powers to intervene to manage a crisis and preemptively identify and manage risks.
“FMIs including financial markets, clearing and settlement facilities, benchmark administrators and derivative trade repositories play a critical role in the operation of financial markets and the financial system more broadly, supporting $18 trillion in securities transactions and $185 trillion in notional value of derivatives transactions every year,” Frydenberg said.
“FMIs enable businesses, investors, and governments to raise capital, access liquidity, manage risk and invest funds.”
The reform package would include:
- The introduction a crisis management regime that would allow the RBA to manage a failure at a domestic clearing and settlement facility. These powers would be supported by a $5 billion standing appropriation, with Ministerial agreement, to provide temporary funding to a CS facility if that were necessary to ensure continuity of services;
- Enhance the supervisory and licensing powers of ASIC and the RBA in respect of FMIs; and
- Streamline and clarify certain regulatory powers.