Federal Budget sees substantial boosts for the financial services sector regulators – Financial Services

Key points

• The Albanese Government’s first budget, handed down on 25
  October by Treasurer Jim Chalmers, provides for substantial boosts
  in funding for ASIC, APRA and AUSTRAC:

• The budget also foreshadows previously unannounced future
  changes to the regulatory landscape, including to the regulation of
  managed investment schemes and climate reporting standards for
  large businesses and financial institutions.




• The Government has committed funds to deal with the fallout
  from recent data breaches, including for the establishment of a
  National Anti-Scam Centre.

ASIC, APRA and AUSTRAC to see big increases in resourcing

Resources for financial services regulation are substantially
increasing. In FY 22-23, ASIC’s budgeted expenses will reach
$695 million in total, up from an estimated actual expenditure of
$611 million in FY 21-22. Nearly $18 million of this increase will
be aimed at ASIC’s core strategic projects, which
include sustainable finance practices, crypto-assets, the Design
and Distribution Obligation, breach reporting, and the new
Financial Accountability Regime (FAR).

The increase to ASIC’s funding will also aid with the shift
from Banking Executive Accountability Regime to the FAR which, when
introduced, will be administered jointly by ASIC and APRA.

APRA’s funding will also rise substantially. APRA’s
budgeted expenses will increase to $683 million in FY 22-23, up
from an estimated actual expenditure of $614 million in FY 21-22.
This increase will go straight towards APRA’s strategic
objectives, with no material changes arising out of the budget
measures.

AUSTRAC will see an increase out of this budget, moving from its
estimated actual expenditure of $103 million in FY 21-22 to
budgeted expenses of $108 million in FY 22-23. These funds will go
towards AUSTRAC’s existing regulatory and intelligence
programs, with the budget outlining a range of target metrics for
the regulator to meet.

Budget measures give a glance at future priorities

A number of budget measures indicate that financial services
regulatory reform is on the table for the future.

• Review of the regulatory framework for managed
  investment schemes and the ongoing review of the Reserve Bank ($2.7
  million funding): The terms of reference for the review of
  the Reserve Bank excludes the Bank’s payments, financial
  infrastructure and banking functions, but any review into the
  regulation of managed investment schemes should be carefully
  followed by responsible entities and other financial services
  licensees.




• Independent review of the Australian carbon credit unit
  market ($0.8 million): Licensees and investors in carbon
  units should take note, with funding from the new ‘Powering the
  Regions Fund’ allocated to this.




• Treasury and the Australian Accounting Standards Board
  development and introduction of climate reporting standards for
  large businesses and financial institutions ($6.2 million over 4
  years): The budget papers indicate that the standards are
  to be in line with international reporting requirements, which may
  refer to the recent release of draft sustainability reporting
  standards by the International Sustainability Standards Board.

Government responds to recent data breaches

It shouldn’t be a surprise that combatting scams, fraud and
identity theft receive additional support in the wake of recent
data breaches across a number of Australian corporates. These
measures, most of which are drawn from existing funds, include:

• additional identity support services such as counselling and
  identity recovery assistance through the Department of Home
  Affair’s arrangement with IDCARE, the national identity and
  cyber support service at a cost of $2 million in once-off funding
  in FY 22-23;




• the Australian Competition and Consumer Commission is to
  establish a National Anti-Scam Centre, at a cost of $9.9 million
  over 4 years; and




• the Treasury is to conduct public scam awareness
  campaigns.

Increases to the Commonwealth Penalty Unit

It’s said that death and taxes are the only certainties in
life. Another item for inclusion in that list might be the
indexation of the Commonwealth Penalty Unit, which is now set to
rise from $222 to $275 from 1 January 2023. This sting of an
additional $53 per penalty unit is expected to generate an
additional $31.6 million in revenue over the 4 years from FY
22-23.

Key conclusions

The Government is putting its money where its mouth is, with the
details in this first budget indicating that financial sector
regulation will continue to be a priority. In addition to the
expected introduction of the FAR, the budget indicates that
additional regulatory reform will be on the horizon.

The financial services sector should be on the lookout for
additional details about key announcements, including the review
into the regulation of managed investment schemes, and the
introduction of new accounting standards for climate reporting
measures.

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