Financial Distress Planning & Management
Each of the four Council of Financial Regulators (CFR) member agencies has specific roles in planning for and managing distress in the financial system. The CFR has a role, if the need arises, to coordinate responses to potential threats to financial stability.
This role is detailed in a Memorandum of Understanding (MOU) dealing specifically with financial crisis management arrangements, which the CFR members signed in September 2008. The MOU reflects the strong commitment of the CFR agencies to open exchange of information and cooperation in crisis management. It covers the objectives of financial distress management and the principles that will guide decisions and actions during times of financial distress, and also sets out the responsibilities of the individual CFR members during such times.
Each member is fully responsible for discharging its own responsibilities within its statutory mandate.
- The RBA has primary responsibility for the maintenance of overall financial system stability, including stability of the payments system, and for providing liquidity support to the financial system or to individual financial institutions where appropriate.
- APRA is responsible for the prudential supervision of banks, building societies, credit unions, life and general insurance companies, friendly societies and certain superannuation funds. In performing its functions to protect the interests of depositors, policyholders and fund members, APRA is required to balance the objectives of financial safety and efficiency, competition, contestability and competitive neutrality and, in balancing these objectives, to promote financial system stability in Australia. APRA has failure management and enforcement powers to deal with a distressed financial institution and is responsible for administering the Financial Claims Scheme.
- ASIC is responsible for monitoring, regulating and enforcing corporations and financial services laws, and for promoting market integrity and consumer protection across the financial services sector and the payments system.
- The Treasury provides advice to the Government on policy and possible reforms that promote a sound financial system, including on financial distress management arrangements. The Treasury has responsibility for advising the Government on matters relating to the exercise of the Treasurer's powers, and on the broader economic and fiscal implications of developments that pose a threat to the stability of the financial system.
In recognition of the strong links between the Australian and New Zealand financial systems, the CFR also plays a central role in coordinating and advancing trans-Tasman crisis resolution and planning arrangements. This is achieved through the CFR members' involvement in the Trans-Tasman Council on Banking Supervision.