The Financial System Inquiry has been a necessary and important process. NAB is supportive of initiatives that seek to improve the efficiency and stability of the Australian financial system and we agree with many, though not all, of the Inquiry’s recommendations. Taken together, we believe that the recommendations will contribute to the development of a financial system that is efficient, resilient and fair.
Participating in the formation of the Australian Bankers Association submissions while also formulating the bank’s own, this submission in response to the final FSI report discusses 15 of the Inquiry’s 44 recommendations. These are the areas where NAB believes its position can assist Government and regulators in implementation.
NAB believes that the following issues will be crucial in ensuring successful implementation of the FSI’s recommendations:
- Resilience: Changes to Australia’s regulatory framework must be compatible with international regulatory developments. As such, they should not run ahead of the Basel Committee on Banking Supervision (BCBS) agenda, which is likely to result in material changes to capital standards for banks globally. Implementation timing must take into account the size and characteristics of Australia’s capital markets, to avoid any market dislocation. The characteristics that define an ‘unquestionably strong’ financial system are broader than just capital alone and a range of other attributes should also be considered by regulators when determining appropriate prudential standards. Implementation should be undertaken on a ‘principles-based’ approach.
- Superannuation and retirement incomes: Since the introduction of compulsory superannuation over 20 years ago, Australia’s pool of retirement savings has grown to be the second largest component of the Australian financial system. Numerous changes and reforms over that time have detracted from its core aims. NAB agrees that it is time to reaffirm and commit to superannuation’s original intent. In the accumulation phase, NAB supports initiatives that will create better member engagement and higher after fee returns. In the retirement phase, NAB already offers a range of solutions that meet many of the objectives identified by the Inquiry and we endorse trustee pre-selection of a robust retirement income product as a preferred solution for a broader range of retirees.
- Consumer outcomes: NAB agrees with the Inquiry that reliance on current disclosure and financial literacy models alone are not sufficient to protect consumers. Greater safeguards are needed. In this regard, much of the product design and distribution processes that the Inquiry recommends are already in place in best practice organisations, including NAB. More innovative and tailored approaches to disclosure and engagement would strengthen the system. For this reason, we encourage ASIC to work closely with the industry to develop an implementation approach that strikes the right balance between consumer protection, product innovation and efficiency.
To read NAB’s full submission, click here: NAB response to final FSI report