Skip to content

Five themes shaping regulation in Australia

Daryl Sisson
Daryl Sisson
Managing Director, Australia and New Zealand, Refinitiv

Individual accountability, regulatory enforcement, and the use of technology are the defining themes of financial regulation in Australia.  These topics and others were discussed by more than 500 senior compliance and regulatory professionals at the 2019 Refinitiv Australian Regulatory Summit in Sydney.


  1. In the wake of the Hayne Royal Commission, the 2019 Refinitiv Australian Regulatory Summit concluded that lack of trust is one of the key issues impacting the financial sector in Australia.  
  2. To restore trust in financial regulation in Australia, regulators have turned to technology and public-private partnerships to improve their supervisory and enforcement capabilities.
  3. Despite efforts by regulators to better engage the industry, Australia’s recently introduced individual accountability regime and open banking initiative received mixed feedback from the sector.

What are the biggest challenges facing the financial industry in 2019?

For Australia’s financial sector, 2019 is somewhat of an inflection point.

The release of the Hayne Royal Commission’s final report in February capped a turbulent few years prior, where increased financial crime, dwindling manpower and widening regulatory divergence impaired the abilities of compliance teams to perform their roles. The Royal Commission did not only find financial institutions to be lax when complying with regulations, it also deemed regulators to be ineffective at exercising supervisory tasks.

In addition, the relentless advancement of technologies, such as artificial intelligence (AI), blockchain and big data, has led to the development of industry solutions that not too long ago were unthinkable.

The 2019 Refinitiv Australian Regulatory Summit

These issues and more were discussed at the 2019 Refinitiv Australian Regulatory Summit, an event that brought together more than 500 senior compliance and regulatory professionals to share experiences and put forward ideas on how to restore trust in the country’s financial system.

Following on from these discussions, I have identified five critical issues which I believe are transforming financial regulation in Australia.

1. An increasingly complex regulatory framework

It’s no accident that when asked to describe the global regulatory environment, summit attendees overwhelmingly favored the word ‘complex’ above others.

With markets increasingly interwoven with each other, Australia is exposed to an array of macro- and microeconomic trends and an ensuing web of complex regulatory frameworks: trade tensions between the US and China; political upheaval in Europe and North America; deteriorating customer trust in the financial system; increased cyber-risks; climate change, and much more.

While governments and international organizations such as the G20 acknowledge the negative impact regulatory divergence exerts, solutions to tackle this issue remain sparse.

In Australia, the market is divided between those wanting a prescriptive regulatory environment and others favoring a principles-based approach. Advocates of the former argue that rules are easier to follow and leave little room for misunderstanding. Proponents of the latter, however, believe guidance encourages responsibility within firms, and avoids a box-ticking approach to compliance. Summit speakers agreed that a hybrid of both will best serve Australia’s financial services industry moving forward.

2. Market practices and investor preferences are changing

A key finding from the Royal Commission was the need for both the market and regulators to change. Financial firms must exert ethical practices at all times, while regulators must be more proactive in pursuing legal action when laws are broken.

Firms must also put the needs of customers unequivocally above those of their shareholders, and devise strategies that build customer trust. In a poll staged at the summit, almost one-fifth of attendees believed trust to be the single biggest challenge for the financial sector in Australia.

Financial institutions must rethink how they address conduct issues. Seldom are illicit acts the result of a single person, as is commonly believed; usually they emanate from misaligned systems and processes.

Firms must address growing demand for investments that account for environmental, social and governance (ESG) factors. Driven by a greater sense of purpose and responsibility expressed by the younger generation, 55 percent of professionally managed funds in Australia today integrate ESG criteria in their investment strategies.

The younger generation is also two to three times more likely to change banks and insurers. This is prompting firms to provide tailored services that meet the specific needs of individual customers.

3. New policies and technologies are empowering regulators

Responding to the Royal Commission’s findings, regulators have clarified their position on numerous issues. The Australian Securities and Investments Commission (ASIC) and the Australian Transaction Reports and Analysis Centre (AUSTRAC) repeatedly stated that meaningful change is the responsibility of the market, and not regulators. In the fight against financial crime, they agree that the industry is the first line of defense. And when the law is broken, they assert, firms will be punished.

To meet today’s increasingly complex operating environment, authorities are using state-of-the-art technologies to streamline interaction with the market. The Australian Tax Office (ATO), for example, leverages AI and big data to deliver timely and easy-to-understand information to businesses and individuals, while supporting informed decision-making within the organization.   

Similarly, AUSTRAC is using sophisticated analytics tools to identify irregularities, predict future trends and typologies, and develop new reporting methodologies.

New technologies are also enabling financial institutions to perform tasks more effectively. For instance, through use of alternative data, compliance teams are able to carry out more robust due diligence activities; and investment managers are able to accurately predict the impact disruptive technologies will have on people, companies and the wider economy in the distant future.

4. New regulatory regimes divide the industry

Despite the efforts by the regulators to be more transparent and engaging in their supervisory approach, recently introduced regulatory regimes have received mixed response from the industry.

The introduction of the Banking Executive Accountability Regime (BEAR) is one significant example. From 1 July 2019, senior executives and directors across all authorized deposit-taking institutions (ADIs) will be personally accountable for misconduct that takes place at their firms. This is somewhat contradictory to the flat management structures within financial institutions, where ownership of tasks is expected of all staff. Furthermore, many believe it is not the top that needs to embrace greater accountability, but the ‘working middle’ that interacts with customers daily.

Australia’s Open Banking initiative faces a similar dilemma. With customers openly sharing information on their income and spending habits, service providers should be able to offer products that are better suited to their needs. The presentation of such information, however, could also discriminate customers from accessing new services, as lenders might spot anomalies that disqualify their eligibility.

For this reason, almost two-thirds of Australians cite data security and privacy as the main reasons for their reluctance to share their financial data through the Open Banking initiative.

5. Cross-industry and public-private partnerships on the rise

The majority of today’s pressing issues require close collaboration between the government and the industry to overcome. To tackle misconduct within financial firms, for example, the market and regulators must come together to voice their difficulties, and co-create solutions that address these challenges.

Likewise, in the fight against crime, the financial sector should work closer with law enforcement through initiatives such as the Fintel Alliance, Australia’s – and the world’s – first public-private partnership to combat money laundering, terrorism financing and other serious acts of crime.

While police and associated entities can gain unprecedented insights into incidents that happen within Australia, access to overseas information will take several years to obtain. Many financial institutions, however, operate across borders, and can provide law enforcement with data that would otherwise be unavailable to them.

Improving financial regulation in Australia

Close collaboration by all industry actors, summit attendees agreed, will make the market stronger, fairer and more prosperous for customers, authorities and financial firms.

To learn more about how the Royal Commission has impacted regulation, compliance and risk management in Australia, read our blog.