Council of Financial Regulators Annual Report – 2001 1. Council of Financial Regulators

The Council of Financial Regulators is the co-ordinating body for Australia's main financial regulatory agencies: the Reserve Bank of Australia (RBA), which chairs the Council; the Australian Prudential Regulation Authority (APRA); and the Australian Securities and Investments Commission (ASIC).

The Council's role is to contribute to the efficiency and effectiveness of financial regulation by providing a high-level forum for co-operation and collaboration among its members. It operates as an informal body in which members are able to share information and views, discuss regulatory reforms or issues where responsibilities overlap and, if the need arises, co-ordinate responses to potential threats to financial stability. These arrangements provide a flexible, low-cost approach to co-ordination among the main financial regulatory agencies. The Council is non-statutory and has no regulatory functions separate from those of its members.

Membership of the Council comprises two representatives – the chief executive and a senior representative – from each of the three regulatory agencies. The Chairman is the Governor of the RBA, and the RBA provides the Council Secretariat. The Council met for the first time in May 1998 and currently meets about once every quarter.^[1] The Council's charter and administrative arrangements are shown in the box below and in Appendix A.

Council Activities in 2001

The year 2001 was one of considerable turmoil in the global economy. International economic conditions were at their weakest for a decade and equity markets underwent substantial corrections. A succession of severe shocks in the latter part of the year – the terrorist attacks of September 11, the collapse of Enron and the largest sovereign debt default in the case of Argentina – further tested the resilience of the global financial system. Despite the external pressures, the Australian financial system continued to perform strongly. These various developments provided the backdrop to the Council's activities in 2001.

On the domestic front, the remaining plank of regulatory reform recommended by the Financial System Inquiry (the Wallis Committee) fell into place when the Financial Services Reform Act 2001, which deals with the regulation of financial markets, was passed into law. The reform agenda, however, is by no means complete: strengthening the prudential framework for general insurance and superannuation remain important priorities. Other important priorities include improving disclosure and quality of financial services to investors and consumers and improving corporate conduct and continuous disclosure to the markets. The involvement of Council members in financial sector reform is outlined in Chapter 2.

On the external front, the global financial system was able to weather the severe shocks of 2001 but its capacity to absorb any additional strains remains a key issue for policy makers. The task of strengthening this system, which has been underway since the Asian crisis a few years earlier, has therefore gained greater impetus. The response of Council members to the financial shocks and their participation in global reform efforts, which the Council itself helps to co-ordinate, is covered in Chapter 3.