Minter Ellison Alert | Final Financial System Inquiry report released

8 December 2014

The Final Report of the Financial System Inquiry chaired by Mr David Murray was released on the weekend. Key points arising from the Report and Mr Murray's speech to CEDA include:

  • "The regulatory architecture developed after the Wallis Inquiry is reasonably effective" but some adjustments are required (CEDA transcript). In other words "the house design is ok, it's just that some taps don't work well" (CEDA speech).
  • Two key areas require adjustment:
    • The consequences of actual and perceived implicit Government support to the banking sector in the Global Financial Crisis (GFC), including the associated moral hazard and market distortions, need to be addressed.
    • Disclosure and financial literacy are necessary but incomplete measures to ensure fair outcomes for consumers. Measures need to be taken to improve the culture of firms in the financial sector which includes imposing additional obligations on product issuers and distributors.
  • An effective financial system must be efficient, resilient and fair.
  • Mr Murray was not prepared to identify the 'top 4' recommendations when asked at the CEDA lunch. He indicated that the report should not be unbundled – recommendations are linked and interdependent.

The Murray Inquiry has taken a different approach to previous inquiries. While the Campbell Report was about opening up the economy and the Wallis Report took a principles-based approach to regulatory architecture, the Murray Inquiry is outcomes focussed. It is more about resetting than rebuilding. The Inquiry is in effect asking in relation to each part of the sector: What outcomes do we want to achieve and how do we get there?

The Report makes 44 recommendations in 350 pages with almost every part of the industry affected. In our FSI blog, we discuss the major recommendations and observations.