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 regu...
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...stralian financial system. The Wallis Inquiry no doubt did a good job. Starting 1997, the country started experiencing regulations and confidence within the country about the prospects of the financial systems grew. With the checks and balances introduced by the regulators, the financial system is well guarded against careless risk taking by financial institutions, which has led to financial catastrophes elsewhere in the world. The too-big-to-fail phenomenon is one unlucky case where banks in other developed countries take risks hoping that the government can bailout them out. In Australia’s case, this is unlikely to happen since the regulators are always watching. Above all however, is the fact that ordinary consumers, investors and financial services beneficiaries are cushioned from losses that may be caused by laxity on the part of the financial institutions.
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