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Transparency needed to avoid “moral hazard” in levies: AIST

Dan Purves




To avoid “moral hazard” the transparency in Cost Recovery Impact Statements (CRISs) needs to increase alongside the levy increases on financial institutions, says David Haynes, executive manager of policy and research at AIST.

The key issue, Haynes says, is ensuring there is appropriate transparency in ways that agencies spend the money that is given to them and accountability for that expenditure.

“It’s about avoiding moral hazard as ultimately it is members’ money,” Haynes says.

“The issue about the cost recovery guidelines is not just an arcane point, it is a point we have been making in many, many submissions over the past few years. The more significant the expenditure becomes, the more important those guidelines become at both a government level and an individual agency level.”

Responding to the government’s paper Proposed Financial Institutions Supervisory Levies for 2016-17, AIST submission highlighted it was difficult to assess the quantum or application of levies because a Cost Recovery Impact Statement (CRIS) had not yet been released.

The potential impact of levies were also hard to assess because the effects of the Regulator Performance Framework (designed to reduce inefficiency and red tape in financial services) had not fully become apparent, given its relatively recent introduction on July 1, 2015.

“We continue to lack information to assess whether resources and outputs are aligned, and whether programs stated in the Proposed Levies Paper are indeed recoupable. We note also that the APRA CRIS that was circulated in arrears last year was considerably low on detail,” the submission says.

In addition, AIST listed the following (further) concerns about the changes to levies:

  • There was little detail regarding the allocation of cost-recoverable items to both the restricted (supervisory) and unrestricted (systemic) component of the levy.
  • It was not adequately explained how significant costs associated with large-scale court cases will be met, particularly as ASIC’s Enforcement Special Account would now be subject to cost recovery.
  • A range of programs would be included in the levies (such as the Early Release of Superannuation Benefits program, the Unclaimed Superannuation Moneys program and the Lost Member Register) but there were no costing methodologies nor information on whether expenditures would be included.


As such, AIST called on the government to simultaneously release CRISs from APRA, ASIC and the ATO, even in a draft form, so that activities, resources and funding could be accurately assessed.
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