Welcome to the last edition of Regulator for 2009.
Bank of England Governor, Mervyn King hit the nail on the head when he said that "it has been a year to remember, but not to repeat". The risk of institutional or systemic failure receded, but the risk of over-regulation emerged. And that is a risk that we think is potentially more damaging in the long term to Australia and its economy than the GFC itself.
Government and the regulators are forcing the financial services industry to react to a myriad of enquiries, discussion papers, proposals and reports. Driven by our Government's perception that we need to be ahead of the G20 curve, we are seeing - and will continue to see - changes in executive and employee remuneration, consumer credit laws, capital and liquidity requirements for banks, as well as leverage ratios and charges for systemically significant bodies, trading and clearing systems for derivatives, risk retention and disclosure requirements for securitisation, the reform of the funds management and superannuation industry and last, but not least, the pending taxation review. There are many others.
At the same time, we are a capital importing nation that relies on the banking system to fund not only the credit in the Australian economy but the necessary offshore investment through our current account. Banks and other financial institutions are in a race for deposits and funding, while at the same time staring down the barrel of competing on an uneven playing field with offshore institutions as we transition from a government-guaranteed funding model to a stand alone model. If Australian banks are to be regulated to the same or higher levels as offshore banks, they need to have available to them the full range of capital and funding sources - covered bonds is just one example of this.
There has also been unprecedented consolidation in the financial services industry in 2009. The industry has been reshaped, as have its competitive forces.
Our main focus for 2010 needs to be on "connecting the dots". Each of the Government's reforms is, of itself, valid but the combined effect is worrying. We think the combination will lead to reduced competition, a higher cost of business and a higher cost but lower supply of credit. This will adversely affect the recovery in Australia and our long term growth. We are committed to working with our clients, and in industry bodies, to identify these issues and to shape a better form of regulation for our market in the years ahead.
Finally, to celebrate the festive season and to thank you for your support during 2009, we are giving away copies of Andrew Ross Sorkin's book on the Wall Street meltdown, "Too Big to Fail". The first 10 Regulator readers to reply to this email will receive a free copy of "Too Big to Fail". Winners will be announced in our January edition.
In closing, let me thank all of our clients for their support this year, and wish you and your families all the best for the festive season.
Best wishes
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Signpost
Mallesons Stephen Jaques Mergers & Acquisitions partner, Tim Bednall, will become the next Chairman of the firm.
The appointment, effective 1 January 2010, was confirmed at the December meeting of the Mallesons Board, following a recommendation by the Board's succession committee. Current chairman, Frank Zipfinger, will end his five-year term on 31 December.
49-year-old Mr Bednall has a leading market reputation, being described by Chambers Global Guide 2009 as "one of the top M&A experts in the country".
Mallesons' Chief Executive Partner, Robert Milliner, congratulated Mr Bednall on his appointment and offered the firm's thanks to Mr Zipfinger for his significant contribution as Chairman since 2005.
“I am looking forward to working with Tim and our partners in continuing to develop Mallesons as Australia's leading law firm. On behalf of the firm, I would like to thank Frank for his leadership of the Board and, at a personal level, for his unstinting support and wise counsel over the last five years," Mr Milliner said.
Mr Zipfinger will continue as Chairman of the “Mallesons in the Community” Board, which oversees the firm's community and charitable programs.