Financial Crisis Management – Power and Accountability

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The Australian Treasury released a consultation paper on September 12, 2012 canvassing views on a wide range of proposals to improve the power of the prudential regulator (APRA) for dealing with regulated financial institutions at risk of failure. Some of the changes involve harmonization of powers across the different categories of regulated institutions, but others involve quite substantial increases in APRA’s power. While appearing generally warranted (and reflecting international developments and standards), there is no attention paid in the consultation paper to the necessary links between power and responsibility. The proposals give APRA significant discretion to use available powers, but are silent on the question of accountability and performance appraisal for decisions made about such use.

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This paper was prepared by Professor Kevin Davis, Research Director of the Australian Centre for Financial Studies.

The ACFS Financial Regulation Discussion Paper series provides independent analysis and commentary on current issues in financial regulation with the objective of promoting constructive dialogue among academics, industry practitioners, policymakers and regulators and contributing to excellence in Australian financial system regulation.

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