Update

Implementation of the Government's response to the Wallis recommendations following the Financial Systems Inquiry announced on 2 September 1997 is well on the way. The Australian financial sector reform legislation package was introduced on 26 March 1998 into the House of Representatives and has been passed in the form as introduced. The last bill in the package was debated by the Senate on 29 May and passed with some amendments. It is now remitted to the Lower House and due to be debated shortly, together with the other bills in the package which were amended by the Senate. It is still intended that the new framework for financial regulation will be in place by or shortly after 1 July 1998.

The Wallis recommendations which affected the insurance industry were discussed in the June 1997 issue of the Insurance Update. The legislation package is designed to implement those recommendations including,

• The establishment of a single Commonwealth agency to carry out prudential regulation of deposit-taking institutions, life and general insurance companies and superannuation funds to provide comparable regulation of all financial products. The agency is to be named the Australian Prudential Regulation Authority (APRA).
• Arrangements for the establishment of a single regulator to provide Commonwealth regulation of corporations, market integrity and consumer protection in the financial system. The proposed regulator, named the Australian Securities and Investments Commission (ASIC), will take over such responsibilities currently undertaken by the ASC, the ISC, the ACCC, the Australian Financial Institutions Commissions and associated State supervisory authorities.

As a consequence of the formation of APRA and ASIC, the existing responsibilities of the ISC are to be allocated between the two new regulators. This is to be effected through amendments to various insurance legislation by the proposed Financial Sector Reform (Amendments & Transitional Provisions) Act 1998,

• The Insurance & Superannuation Commissioner Act 1987 is repealed thereby abolishing the office of the ISC.
• The regulatory responsibilities under the Insurance Contracts Act, the Insurance (Agents & Brokers) Act, section 113 of the Insurance Act (dealing with Code of Practice compliance) and the provisions relating to market integrity and consumer protection regulation in the Life Insurance Act are transferred to the ASIC.
• The regulatory responsibilities under the Insurance Act (except section 113) and the prudential regulation provisions of the Life Insurance Act are transferred to the APRA.

The package also includes a new Financial Sector (Shareholdings) Bill designed to implement a standardised regime for shareholding rules governing financial institutions including those in the insurance and deposit-taking sectors. Amendments to the Insurance Acquisitions & Takeovers Act facilitated the streamlining of such regulation by transferring responsibility for regulation of acquisitions and of issue of shares in Australian insurance companies from the ISC to the APRA.