Twin Peaks 2.0: Reforming Australia's Financial Regulatory Regime in Light of Failings Exposed by the Banking Royal Commission

2018 ◽  
Author(s):  
Andrew Schmulow ◽  
Karen Fairweather ◽  
John Tarrant
Keyword(s):  
Royal Commission ◽  
Regulatory Regime ◽  
Twin Peaks ◽  
Financial Regulatory

Twin Peaks 2.0: Avoiding Influence Over an Australian Financial Regulator Assessment Authority

2021 ◽  
pp. 0067205X2110398
Author(s):  
Andrew Schmulow ◽  
Paul Mazzola ◽  
Daniel de Zilva
Keyword(s):  
Financial System ◽  
Royal Commission ◽  
Regulatory Regime ◽  
Regulatory Capture ◽  
Financial Industry ◽  
Market Conduct ◽  
Twin Peaks ◽  
Current Design ◽  
The One ◽  
Sources Of Influence

Globally, financial system regulators are susceptible to deliberate and inadvertent influence by the industry that they oversee and, hence, are also susceptible to acting to benefit the industry rather than the public interest – a phenomenon known as ‘regulatory capture’. Australia, arguably, has an optimal model of financial system regulation (a ‘Twin Peaks’ model) comprising separate regulators for prudential soundness on the one hand, and market conduct and consumer protection on the other. However, the current design of the Twin Peaks model has not been sufficient to prevent and address prolonged and systemic misconduct that culminated in a public Royal Commission of Inquiry into misconduct in the industry. Subsequent to the Royal Commission and other inquiries, the Department of Treasury has proposed legislation to establish an Assessment Authority to assess the effectiveness of the Twin Peaks regulators. The proposal includes enquiries by an Assessment Authority into the regulators’ independence, so as to identify instances of, and thereby mitigate, their capture. As with all financial system regulators, the Assessment Authority itself may be susceptible to regulatory capture, either by the Twin Peaks regulators, or by the financial industry. Thus, this paper poses the question: how can the new Assessment Authority be optimally constituted by legislation, and operated, to effectively oversee the effectiveness of the regulators, but itself remain insulated from the influence of the regulators and industry? We analyse the primary sources of influence over financial system regulators that the Assessment Authority will likely face and recommend ways in which a robust design of the Assessment Authority can mitigate those sources of influence. In doing so, we adopt an inter-disciplinary approach, drawing upon not only regulatory theory but also for the first time in relation to this question, organisational psychology. Our findings address gaps in the proposed legislation currently before Federal Parliament and propose methods by which those gaps may be filled, in order to ensure that this important reform to Australia’s financial regulatory regime has the greatest chance of success.

Toward a Typology of Crowdfunding Motivations

2016 ◽  
pp. 108-128
Author(s):  
Leela Vedantam
Keyword(s):  
Environmental Factors ◽  
Income Group ◽  
Financial Assistance ◽  
Regulatory Regime ◽  
Checks And Balances ◽  
Modern Approach ◽  
Group Members ◽  
The Impact ◽  
Financial Regulatory ◽  
Good Cause

Crowdfunding is a modern approach to provide real-time financial assistance to those entrepreneurs who are interested in starting seed ventures. This phenomenon is developing slowly and the financial regulators are considering options to put appropriate checks and balances to regulate these activities. Although the experience of crowdfunding may not be satisfying as it ought to be, but there a sense of willingness on the part of the civil society to participate in crowdfunding as it is associated with a good cause. It is important to note that crowdfunding as a system is being based amongst small and mid-sized income group members. The motivation to support the cause of entrepreneurs is growing as the fund lenders are novice and in the threshold stage of supporting such seed ventures. The motivations of fund lender differ depending on their personal and environmental factors, especially in connection to the emerging laws and mandatory disclosures under the financial regulatory regime. In this paper, the focus is on (i) identification of what motivates fund lenders to support entrepreneurs and the impact of the fund movement.

scholarly journals Regulating the Regulator : Improving Consumer Protection under a Twin Peaks Regulatory Framework

2018 ◽  
Vol 3 (No. 1 Apr 2018) ◽  
pp. 1-14
Author(s):  
Andrew Schmulow
Keyword(s):  
Rule Of Law ◽  
Consumer Protection ◽  
Regulatory Framework ◽  
Industrial Scale ◽  
Twin Peaks ◽  
Regulatory Design ◽  
The Law ◽  
Financial Regulatory

Australia is in the midst of a financial regulatory crisis. Evidence of malpractice, fraud, criminality, contempt for the law, and the abuse of consumers on an industrial scale, all while Australia’s Twin Peaks regulators looked on, has come as a shocking surprise. The implications stretch well beyond Australia: they are relevant wherever the Australian ’Twin Peaks’ model has been adopted or is under consideration. This article argues that the Twin Peaks model must be analysed from the perspective of regulatory design, as well as implementation. The design - the architecture of Twin Peaks - remains optimal. However the implementation - the plumbing - requires urgent reforms. Drawing on the work of notable international scholars, this article proposes a new accountability framework for the two, peak regulators, in order to enhance their efficacy. In the process of rescuing Twin Peaks from its current inadequate plumbing, consumers may expect to enjoy levels of protection commensurate with those of a developed economy possessed of rule of law.

scholarly journals The International Campaign to Create Ethical Bankers

2017 ◽  
Vol 3 (2) ◽  
pp. 187-209 ◽  
Author(s):  
David Zaring
Keyword(s):  
Financial Regulation ◽  
Standard Setting ◽  
Regulatory Regime ◽  
Ethical Standards ◽  
Bank Capital ◽  
Financial Firms ◽  
Tone At The Top ◽  
Global Regime ◽  
Financial Regulatory ◽  
International Financial Regulation

ABSTRACT The substance of international financial regulation has been created through informal standard setting among regulators acting through networks. This standard setting has frequently been concrete and specific, as the evolving international bank capital rules exemplify. But banking supervisors have recently turned their focus towards the creation of a global set of ethical standards for bankers, only vaguely defined at best. Regulators have emphasized the importance of ‘culture’ set by a ‘tone at the top’, though they have not yet explained what is required by the terms. This new focus of international financial regulation epitomizes the irreducibly informal nature of multinational standard setting, even in a global regime that has tried for precision. It also represents a commitment by financial regulators to cosmopolitanism: the effort to create consistent global ethical standards for financial institutions assumes away differences in industry structure and national cultures in the service of a vision of a consistent financial regulatory regime applied to banks and non-bank financial firms across the world.

Toward a Typology of Crowdfunding Motivations

Crowdsourcing ◽  
2019 ◽  
pp. 152-172
Author(s):  
Leela Vedantam
Keyword(s):  
Environmental Factors ◽  
Income Group ◽  
Financial Assistance ◽  
Regulatory Regime ◽  
Checks And Balances ◽  
Modern Approach ◽  
Group Members ◽  
The Impact ◽  
Financial Regulatory ◽  
Good Cause

Crowdfunding is a modern approach to provide real-time financial assistance to those entrepreneurs who are interested in starting seed ventures. This phenomenon is developing slowly and the financial regulators are considering options to put appropriate checks and balances to regulate these activities. Although the experience of crowdfunding may not be satisfying as it ought to be, but there a sense of willingness on the part of the civil society to participate in crowdfunding as it is associated with a good cause. It is important to note that crowdfunding as a system is being based amongst small and mid-sized income group members. The motivation to support the cause of entrepreneurs is growing as the fund lenders are novice and in the threshold stage of supporting such seed ventures. The motivations of fund lender differ depending on their personal and environmental factors, especially in connection to the emerging laws and mandatory disclosures under the financial regulatory regime. In this paper, the focus is on (i) identification of what motivates fund lenders to support entrepreneurs and the impact of the fund movement.

How Does the Strength of the Financial Regulatory Regime Influence Auditors' Judgments to Constrain Aggressive Reporting in a Principles-Based Versus Rules-Based Accounting Environment?

2013 ◽  
Vol 27 (3) ◽  
pp. 579-601 ◽  
Author(s):  
Jeffrey R. Cohen ◽  
Ganesh Krishnamoorthy ◽  
Marietta Peytcheva ◽  
Arnold M. Wright
Keyword(s):  
Financial Reporting ◽  
Balance Sheet ◽  
Regulatory Regime ◽  
Standard Type ◽  
Accounting Standard ◽  
Financial Reporting Standards ◽  
Accounting Environment ◽  
Degree Of Convergence ◽  
Financial Regulatory ◽  
The U.S

SYNOPSIS: With the movement toward adoption of International Financial Reporting Standards (IFRS) worldwide, a question arises as to whether the adoption of a principles-based approach, such as IFRS, will ultimately result in higher-quality financial reporting. This issue is particularly relevant because, even though for now the SEC is not adopting IFRS, the securities markets and the SEC still need to ponder the implications of a decision that may lead to the ultimate adoption of, or at least some degree of convergence with, IFRS in the U.S. To examine this issue, we employ an experiment with 97 experienced auditors as participants. Using a case setting involving the classification of a lease (operating versus capital), we manipulate the accounting standard type as rules-based or principles-based, and the regulatory regime as stronger or weaker. The lease setting is one where there are indications of management's incentives to leave the debt off of the balance sheet and, hence, engage in aggressive reporting. We find, as expected, that auditors are more likely to constrain aggressive reporting under principles-based accounting standards than under rules-based standards, under both stronger and weaker regulatory regimes. Importantly, from a public policy perspective, the results indicate that auditors' judgments under principles-based standards, regardless of the strength of the financial regulatory regime, lead to more conservative reporting when compared to rules-based standards coupled with a stronger financial regulatory regime, which is the way the U.S. environment is often characterized.

scholarly journals Financial Regulatory Governance in South Africa: The Move Towards Twin Peaks

2017 ◽  
Vol 25 (3) ◽  
pp. 393-417 ◽  
Author(s):  
Andrew Schmulow
Keyword(s):  
South Africa ◽  
South African ◽  
Financial System ◽  
System Stability ◽  
Regulatory Enforcement ◽  
Market Conduct ◽  
Regulatory Governance ◽  
Twin Peaks ◽  
Similarities And Differences ◽  
Financial Regulatory

This article examines the implementation of the Twin Peaks model of financial system regulation in South Africa, the purpose of which is to create a financial system stability regulator, and a financial system consumer protection and market conduct regulator. It examines the historical development of Twin Peaks and its regulatory enforcement principles. It then analyses the similarities and differences between Twin Peaks in Australia (upon which the South African reforms are based) and South Africa. Finally the article provides concluding observations.

scholarly journals On the Reform of China's Financial Regulatory Regime

2017 ◽  
Vol 29 (4) ◽  
pp. 277-292
Author(s):  
Li, Guo ◽  
Zhu, Di
Keyword(s):  
Regulatory Regime ◽  
Financial Regulatory
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