Scott Farrell, the chair of the federal government’s review of payments regulation, says the Reserve Bank will play a critical role as “the captain” of the regulatory framework in the future but that Treasury will act as “coach”.
In an interview with Fintech Australia chair Simone Joyce on Tuesday, Farrell said the RBA had observed its legislative mandate “very well” and that he couldn’t support the idea of establishing a single payments regulator because the skill sets and expertise required to implement change already resided within the existing financial regulators.
Farrell made the comments in response to a question on whether the RBA had the right mentality to support innovation in the Australian payments sector.
“I think they (the RBA) follow their mandate very well,” Farrell told the Fintech Australia briefing.
“They’re very careful in their (retail payments) review to describe what the legislation allows them to look at.
“They’ve been around for sixty years now and that’s what they’re built to do – stability, efficiency, competition.
“The reason for the new designation power (for the Treasurer) is that I don’t really want the captain playing out of position.”
Farrell went on to explain that giving the Treasurer powers to designate payments systems would give the government and regulators more flexibility to tackle reform challenges.
Farrell referred to scenarios within his recommended architecture where the RBA might not feel comfortable taking regulatory action today because of its statutory remit, but might do so upon direction from the Treasurer who would also hold “all-encompassing designation powers”.
He stressed that the Treasurer would also have flexibility to select the appropriate financial regulator to supervise or overhaul different aspects of the payments industry potentially at the same time, with the RBA focused on the stability and efficiency implications of a payments issue, while ASIC might be tasked with other aspects.
Farrell said that he did not recommend establishing a stand-alone payments regulator because the RBA, ASIC, AUSTRAC and other incumbents understood “their own turf”.
“I got quizzed a number of times as to why we don’t have a single regulator,” he said.
“I said you wouldn’t want to throw away this skill-set combination because with some of the challenges we’ll have in the future I wouldn’t back any single organisation to be able to solve all of these problems.
“But five plus the Treasury- that’s five different perspectives.
“It really doesn’t matter what you think about their (the regulators) ability to govern outside their own box, at least they know their stuff about their own turf.
“That’s why I think it’s really important not to make them move beyond their position but we have to make sure the game isn’t lost because they’re stuck in their positions.
Farrell said one of the biggest challenges of his recommended framework would for Treasury to acquire the people, skills and mindset to operate as a “coach” of the payments industry.
“They need to be the coach, not the referee,” he said.
“That’s going to be hard.”