The Council of Financial Regulators (CFR) was established in 1998 following the recommendations of the Financial System Inquiry in 1997 (the Wallis Committee). With the wide-ranging changes to Australia's financial regulatory structure in 1998, including the establishment of a single integrated prudential regulator in APRA, the establishment of a separate regulator in ASIC to deal with market integrity and consumer protection issues across the financial system, and revised responsibilities for the RBA, the CFR was seen by the Wallis Committee as the collaborative dimension of the regulatory agencies' activities. The Wallis Committee did not foresee it as a separate body, rather its strength coming from the commitment of its members to cooperate closely.
The CFR succeeded the Council of Financial Supervisors, which operated from 1992 to February 1998, to facilitate coordination and communication among the major financial regulators during that time. Its members were the RBA; the Insurance and Superannuation Commission; the Australian Securities Commission; and the Australian Financial Institutions Commission.
At the time of its establishment in 1998, the CFR's membership consisted of the RBA, APRA and ASIC. The CFR's inaugural meeting was held in May 1998.
In June 2003, the Treasurer announced that The Treasury would join the CFR as its fourth member. This was to ensure that coordination among the principal financial regulatory agencies with an interest in financial stability would continue at the highest level. This timing also coincided with the introduction of new governance arrangements for APRA, with its board being replaced by a three-member executive group.
Since this expansion in membership, many of the CFR's discussions have focused on developments in the Australian and global financial systems, particularly the adequacy of Australia's financial regulatory architecture in dealing with potential threats to financial stability. Relevant examples include:
- In November 2005, the CFR advised the Government on a package of measures, including the introduction of a Financial Claims Scheme (FCS) that would provide depositors in a failed authorised deposit-taking institution (ADI) and policyholders in a failed insurer with timely access to their funds up to a certain limit.
- The CFR played a critical role in the latter part of 2008 at the height of the global financial crisis when the Government introduced the FCS along with a Guarantee Scheme for Large Deposits and Wholesale Funding. The CFR provided advice to the Government on the specific features of these guarantee arrangements, which were designed to promote financial system stability in Australia, by supporting depositor confidence and assisting ADIs to access funding at a time of considerable financial market turbulence.
- At the request of the Government, the CFR undertook an assessment in 2010 of whether the structure of the FCS was suitable for the post-crisis environment. Its advice informed the Government's revised arrangements for the FCS, including a lowering of the cap, which were subject to a public consultation process prior to their finalisation in September 2011.