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Regulator - December 2011

​Welcome to our December issue of Regulator.

The rate of regulatory reform this year has been extraordinary. We have seen the introduction of controversial legislation such as the Minerals Resources Rent Tax, the Carbon Tax,  the Executive Remuneration changes (including the two strikes rule) and Price Signalling laws to name a few. There have also been sweeping reforms across the financial services sector with  APRA moving full steam ahead with its new rules for capital products and liquidity guidelines and the government’s introduction of the Future of Financial Advice Reforms that are expected to transform the financial planning industry. The funds and superannuation industry has also undergone significant reform with the Government’s Stronger Super package now well underway.

In other developments, the Banking Act was revised to allow Australian banks and other authorised deposit-taking institutions to issue covered bonds. This has been a welcome development and there have already been two successful issues by Westpac and ANZ.

Over the past 12 months ASIC has introduced new rules covering the conduct of operators and participants as well as guidelines for prospectus disclosure. These developments, among others, feature in ASIC’s Annual Report for the 2010/ 2011 financial year. In this edition of Regulator Kate Johnson and I provide a short overview of the report’s key highlights.

As our faithful Regulator readers would know, we have been tracking the carbon debate since the tax was first proposed and offering our views on its implementation and implications. Now that the emissions trading scheme has become law, Scott Farrell looks at how the carbon market will take shape in 2012 and the impact on the Australian financial services framework.

The proposed Basel III liquidity standards will have far reaching effects on the banking sector and we have been advising our clients on how to manage and respond to the new rules. In previous editions of Regulator we have examined various aspects of the Basel III framework and, in this edition, Greg Hammond and Heidi Machin provide an update on a recent consultation paper issued by ASIC which proposed relief to facilitate the issue of term deposits which are only breakable on 31 days’ notice in response to the Basel III liquidity standards.

Another significant issue in the area of financial services reform this year has been the debate over the central clearing of over-the-counter derivatives (OTC) transacted in the Australian financial markets. The industry has been divided on how to best centrally clear the $5.9 trillion Australian interest rate derivatives market. With the recent collapse of MF Global, the issue of protecting client money in OTC derivatives has surfaced as a key concern. In response, Treasury has released a discussion paper focused on improving client money protections for OTC derivative transactions with retail clients. In their article, Scott Farrell and Heidi Machin give an overview of the reform options outlined in the paper.

While the major structural reforms that Australia has undergone in recent years have been primarily focused on improving domestic markets, these changes have also helped to position Australia in an ideal place to take advantage of Asia’s rapid economic development. In his article, David Olsson stresses the importance of Australia’s promotion of its sound regulatory framework and high performing financial institutions if it is to become an active player in the Asian market and enhance its sphere of influence in the region.  

It’s not just the Australian market that is experiencing unprecedented reform, Hong Kong regulators have also been tightening controls on the financial sector during the last 12 months and this trend looks set to continue in 2012. In their article, Richard Mazzochi and Urszula McCormack examine the regulatory blueprint over the next 12 to 24 months which will have significant impacts on the legal and financial industry in the Asian region as well as offshore.

As always, we welcome your feedback or suggestions for future editions of Regulator.

I hope that you and your families have a happy and safe festive season and wish you all the very best for 2012.

Best wishes,

 

Diana Nicholson
 

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Mallesons launch first two covered bond issues in Australia

Mallesons has been instrumental in the development of the covered bonds market in Australia, advising the government and industry bodies on developing the framework for covered bonds in Australia and acting for our clients on the first two covered bonds transactions ever priced and sold by Australian banks (ANZ and Westpac respectively).

APRA releases discussion paper on covered bonds and securitisation

APRA has released for consultation a discussion paper outlining its proposals to introduce a new prudential standard for authorised deposit-taking institutions (ADIs) that issue covered bonds. The discussion paper is accompanied by a draft of Prudential Standard APS 121 Covered bonds (APS 121). If you would like advice on making a submission we can help. Please contact Philip Harvey for more information.

Mallesons wins KangaNews Law Firm of the Year award

We are very pleased to announce that we received the award  for Law Firm of the Year at the 2011 Kanga News Awards. We would like to also congratulate our clients who were also recognised with awards. Click here to view the full list of winners.

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Key developments in financial sector regulation

IN THIS ISSUE:

An emissions trading scheme is now part of the laws of Australia.  This heralds the birth of the Australian carbon market, and the incorporation of this new market into to our financial services framework.  From a financial markets law perspective, what else could there be to do? Read more

An overview of the coverage of these two key ASIC publications. Read more

Basel III liquidity requirements: Proposed ASIC relief for deposits with 31 day break period

A recent consultation paper issued by ASIC proposes relief to facilitate the issue of term deposits which are only breakable on 31 days’ notice in response to Basel III liquidity standards. Read more

The Australian Federal Treasury released a discussion paper in November on the handling and use of client money in relation to over-the-counter derivatives transactions. Read more

Hong Kong regulatory update

Hong Kong regulators maintained a strong momentum for reforms for the financial sector during the last quarter.  These reforms are creating a regulatory blueprint for 2012-2013 that leaves very few areas of business untouched - and certainly no prospect of monotony for legal and compliance teams in the region. Read more

The Asian Century: emerging roles for Australian business leaders

The development of the Government’s recently announced White Paper on Australia in the Asian Century reinforces the importance of having business and government work together to promote Australia’s influence in the region, especially though the promotion of solid institutions and sound regulatory frameworks. Read more