I am pleased to take you up on your offer for comments on financial regulation. Here are some modest suggestions.
1) There is a need for greater diversity in corporate forms within the financial sector – the standard limited liability company model is not working well enough. We need at least some deposit taking institutions to follow a model of corporate governance on offer in Germany – the KgaA http://En.Wikipedia.Org/Wiki/Kommanditgesellschaft_Auf_Aktien (in which one senior partner has unlimited liability). Depositors should at least have some choice about the model they use to park their savings.
2) There is a need for accessible and intelligent information campaigns for the general public on financial regulation; for example, too few Australians would understand what the current federal gov’t guarantee for bank deposits is ($250,000 per account under the financial claims scheme run by APRA) ), let alone how this is calculated.
3) Since sovereign debt has re-emerged as a key issue, deposit taking institutions open to the general public (including super funds) should have to include details of their exposure to all government bonds (domestic and overseas) in their annual reports. At the very least this would prevent the present mess, in which gossip circulates endlessly about which OZ banks are exposed to the debacle with the PIGS (Portugal, Italy, Greece, Spain).
4) For greater transparency all round, reform our infamous libel laws, so that spivs have less chance to hide.
5) Industry associations should be authorised to levy a modest annual rate from members to fund modest but realistic restitution to any finance industry staff who get sacked or forced into retirement for whistle-blowing; the fund would be equivalent to the sort run by the Law Society for victims of malpractice by lawyers.
6) As always, we need fundamental changes to taxation so that ordinary workers/households can save as much as possible for a truly independent retirement; if people cannot expect to live well off their savings, they will be driven to precisely the sort of speculative excesses that we need to limit. Taxing the income from savings should be limited to the seriously wealthy alone. Instead of gas-bagging about aspiration, our political masters need to get serious about enabling it!
A Watcher, 5 April 2012