The year 1996 market a turnaround for the financial system in Australia. It is in this year that the Finance Treasurer announced the formation of the Financial System, Inquiry also known as the Wallis Inquiry, which was intended to check the financial system in the country. Specifically, the Inquiry was mandated to research and analyse the consequences of financial deregulation in the country since the 1980s and; analyse the driving forces affecting change in the Australian financial system, especially in view of technological development. Based on the results of the exercise, the Inquiry was further mandated to provide regulatory recommendations that would be enforced in the country in order to ensure that the financial system was responsive, efficient and flexible to the contemporary needs of Australia. It was hoped that proper regulations would lay the basis for financial stability, better economic performance, integrity, fairness and prudence in the country’s financial system (Commonwealth of Australia, 2009). Prior to this, the financial system had been de-regulated in the 1980s, around the same time that the Australian Dollar was floated (Cameron, 1998).
Upon the completion of the inquiry, the FSI proposed a regulation system based on three agencies namely: i) the central bank; ii) a prudential regulator, and; iii) “a corporations and financial services commission” (Cameron, 1998, p. 4).
The recommendations of the Wallis Inquiry were enacted in 1997 (Bakir, 2003). Before this however, Australia had a largely semi-regulated financial system. The bulk of the regulators back then followed under the commonwealth with the main mandate of overseeing them falling under the treasurer. States also regulated a small number of players in the financial system mainly under the ministerial council watch. Under the treasurer were the ACCC , which was in charge of consumer protection and trade practices; RBA, which was in charge of banks; Insurance and Superannuation Commission, which was in charge of general insurers, superannuation and life insurers, and; Australian Securities Commission, which was in charge of corporations’ law, market integrity and unit trusts. The Ministerial councils on the state level hand on the other hand the mandate to oversee the operations of the Australian Financial Institutions Commission, which was in turn charged with the responsibility of overseeing the operations of credit unions and building societies (Bakir, 2009, p. 912). Overall, there were 11 supervisory agencies in the country’s financial system, which formed the “Council of Financial Supervisors”, which according to Bakir (2009) were not only a “historical accident” on the part of the country, but continued to be a great injustice to the proper functioning of the financial system in Australia (p. 7). Among the most stated anomaly of the pre-Wallis period were the regulatory gaps, discord and overlaps that the different agencies...