The Financial System Inquiry is coming

21 November 2013 | By Michael Chaaya (Partner)

The draft terms of reference are here!          

David Murray, former CEO of the Commonwealth Bank and Future Fund Chairman, will lead the Financial System Inquiry (FSI) as committed to by the new Government. 

The final report is expected to be delivered to the Government by November 2014.


The FSI forms part of the Government’s broader deregulation agenda.

The FSI will examine “how the financial system could be positioned to best meet Australia’s evolving needs and support Australia’s economic growth”.[i]  Importantly, the FSI will report on the developments in the Australian financial system since the 1997 Wallis Inquiry, led by Stan Wallis.

Looking back

The Wallis Inquiry identified inefficiencies in the financial services system at that time in terms of product disclosure, licensing, conduct and financial markets.  The current financial system is the result of an extensive legislative and regulatory reform agenda which followed the Wallis Inquiry.

It’s an extensive agenda

The draft terms of reference (listed below) will be finalised and announced mid-December, as will the final composition of those who will head the FSI.



The Inquiry will report on the consequences of developments in the Australian financial system since the 1997 FSI and the GFC, including implications for:


how Australia funds its growth;


domestic competition and international competitiveness; and


the current cost, quality, safety and availability of financial services, products and capital for all end users.


The Inquiry will refresh the philosophy, principles and objectives underpinning the development of a well-functioning financial system, including:


balancing competition, innovation and efficiency, with stability and consumer protection;


 how financial risk is allocated and systemic risk is managed;


assessing the consequences of financial regulation, including its impact on compliance costs, flexibility, innovation and financial services trade;


the role of Government; and


the role, objectives, funding and performance of financial regulators.


The Inquiry will identify and consider the emerging opportunities and challenges that are likely to drive further change in the financial system, including:


the role and impact of new technologies, market innovations and changing consumer preferences and demography;


international integration, including international financial regulation;


changes in the way Australia sources and distributes capital, including the intermediation of savings through banks, non-bank financial institutions, insurance companies, superannuation funds and capital markets;


changing organisational structures in the financial sector;


corporate governance structures across the financial system and how they affect stakeholder interests; and


developments in the payment system.


The Inquiry will recommend policy options that:


promote a competitive and stable financial system that contributes to Australia’s productivity growth;


promote the efficient allocation of capital and cost efficient access and services for users;


support individuals and businesses to be reasonably able to manage their finances by understanding risks and rewards in the financial sector;


foster dynamic and innovative financial service providers; or


relate to other matters that fall within this terms of reference.


The Inquiry will take account of the regulation of the general operation of companies through corporations law to the extent these impinge on the efficiency and effective allocation of capital within the financial system.


The Inquiry will examine the taxation of financial arrangements, products or institutions to the extent these impinge on the efficient and effective allocation of capital by the financial system, and provide observations that could inform the Tax Policy White Paper.


In reaching its conclusions, the Inquiry will take account of, but not make recommendations on the objectives and procedures of the Reserve Bank in its conduct of monetary policy.


The Inquiry may invite submissions and seek information from any persons or bodies.


A final report is to be provided to the Treasurer by 1 November 2014, following an extensive period of consultation. Consultation will include the publication of an interim report that communicates the Committee’s predispositions, allowing adequate time for interested persons or bodies to provide input to the final report.


Those interested have until Thursday, 5 December 2013 to make a submission to the Government.

We will keep you updated on developments and are available to assist you with submissions.  Please contact any member of our team listed in this publication. 

  [i] Financial System Inquiry – Draft Terms of Reference.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Michael Chaaya

Partner. Sydney
+61 2 9210 6627


Joanne Dwyer

Special Counsel. Brisbane
+61 7 3228 9375


Christine Maher

Consultant. Brisbane
+61 7 3228 9413