Financial System Inquiry
8 December 2014:
Treasurer Joe Hockey released the final Financial System Inquiry (FSI) report in Sydney yesterday, delivering on a pre-election commitment of the Abbott Coalition Government. Led by David Murray AO, the Inquiry found that the financial system has performed well since the Wallis Inquiry of 1997, the last in-depth examination of the financial system, and offers 44 recommendations for the Government’s consideration as well as a blueprint for an efficient and resilient financial system for the next 20 years. A third of these recommendations seek to improve competition in the financial sector, while several relating to taxation will be fed into the upcoming Tax White Paper.
The main recommendations of the report relate to banking capital and superannuation, noting that since 1996, output from the financial services sector has increased from $41 billion to $133 billion, and the superannuation system has grown from $300 billion of assets in 1997 to $1.8 trillion today. In particular, the Inquiry Panel suggests that banks hold more capital to remain ‘unquestionably strong’ or, as Murray expressed, hold a global position in the top 25 per cent on this measure. In regard to superannuation, the Report advocates for more competition and changes to the governance of superannuation funds.
In the course of compiling the report, the Panel received over 6,800 submissions and hosted hundreds of stakeholder meetings across Australia and overseas. This process will now continue in earnest for the Government, who will consult on the recommendations up until 31 March 2015, before responding to the final report.
The Report overview provides analysis of the general themes relating to funding the Australian economy and competition, while five specific themes comprise the distinct chapters. GRACosway’s summary below offers an introduction to these specific themes and lists the majority of the Report’s recommendations.