Australia’s financial regulators are united in their call to work more collaboratively with government and industry to meet shared goals.
Fostering a culture that supports collaborative regulation will reduce the need for government intervention, say the three primary regulators of Australia’s financial system.
At a recent event in Sydney, CPA Australia connected the leaders of the regulatory pillars – Greg Medcraft, chair of the Australian Securities and Investments Commission (ASIC); Wayne Byres, chair of the Australian Prudential Regulation Authority (APRA); and Paul Jevtovic, CEO of the Australian Transaction Reports and Analysis Centre (AUSTRAC) – bringing them together for their first ever public panel discussion about the purpose of regulation.
Hosted by former CPA Australia chief executive Alex Malley, the trio stressed that regulation today was not about wielding the proverbial big stick but instead was more focused on a collaborative, technology-neutral approach that recognises one size does not fit all.
“We are challenging the regulatory model; it’s about collaboration.” Paul Jevtovic, Austrac
“We have to be smarter about how we go about our business,” said Jevtovic, whose AUSTRAC unit investigates organised crime, money laundering and terrorism funding.
“We are challenging the regulatory model; it’s about collaboration. Someone asks ‘can you collaborate three days a week and then issue sanctions in the last two days?’ The answer is yes, you have to be able to.
“We are expected to have the courage to give frank and fearless advice and we have to do this for the health of our business.”
Byres said that while the world was changing, the regulator’s role hadn’t.
“Community expectations have changed … we all have to be nimble and fit for purpose.” The regulators stressed their independence, despite taking their mandate from government. Medcraft said it made sense for them to be aware of the government’s sensibilities and its policy agenda.
“That collaboration is a much more efficient way of achieving our outcomes.”
What does the regulatory future look like?
Byres said he was wary of heading down a path of regulating for technology. “What we have to do is be technology neutral,” he told the gathering.
“It would be dangerous for any of us to pick the technology that will win.
“That means the regulatory framework is going to end up more principles-based … and that puts a premium on experience and judgement to be able to apply that framework. People who understand the industry … have got the capacity to exercise sensible judgements.”
Medcraft said culture was now more important than ever. “We use culture as a surveillance indicator,” he said.
“You need a culture your customers can believe in. If you don’t, your customers will tell everyone. We are trying to encourage a systemic approach to measurement of culture – ‘Where’s the evidence?’”
Byres agreed, saying culture was the last frontier of regulation and that organisations need to lead, from the board down.
“The best defence of problems in the financial system will be institutions running themselves for the long term,” he said.
“Our test is: ‘Do financial institutions take this seriously? Do they see it as strategically important?’”
A question of privacy
Privacy is often debated in the regulatory environment and Jevtovic said Australia needed a mature debate on privacy.
“Our issues of privacy are 19th and 20th century fundamentals of privacy and we’re trying to fight 21st century problems,” he said.
“The world has changed … how do we deal with information and data that might be collected for one purpose but that might be used for other purposes?”
Government and private business battle it out over regulation