1.        The below extract of A revised Interchange Standard for the EFTPOS System -  November 2009 appears to précis the respective responsibilities of both the RBA Board and the PSB:

2.         Former Reserve Bank assistant governor, Dr Malcolm Edey, below response to the former Federal Senator, Sam Dastyari, on 1 June 2015 at Economics Legislation Committee - 01 June 2015 - Estimates which print journalist, George Lekakis, commented on in THE NEW DAILY article "Watchdogs quiet as banks gouge credit cards" on 2 June 2015 :

             "The reason why it has not been looked at is: we do not have an interest rate regulator in Australia. We do not have regulated interest rates. What we do have is an ACCC that can investigate uncompetitive conduct if they see it, but they clearly have not seen it in this market.............................. We do not have laws for the regulation of interest rates."

Below is an extract from MEMORANDUM OF UNDERSTANDING - ACCC AND RESERVE BANK OF AUSTRALIA dated 8 Sept 1998:

3. The legislation is intended to ensure that there is no regulatory overlap.  It defines responsibilities as follows:

• the ACCC is responsible for ensuring that payments system arrangements comply with the competition and access provisions of the Trade Practices Act, in the absence of specific RBA initiatives (see below). Under its adjudication role, the ACCC may grant immunity from court action for certain anti-competitive practices, if it is satisfied such practices are in the public interest. It may also accept undertakings in respect of third party access to essential facilities; and

• the RBA may, under the Payment Systems (Regulation) Act, designate a payment system as being subject to the RBA's powers.  Following public consultation, the RBA may then impose an access regime on the participants and/or determine standards for that system. Where the RBA has taken such initiatives, members of that system will not be at risk under the Trade Practices Act by complying with the RBA's requirements.

4. The effect is that the ACCC retains responsibility for competition and access in a payments system, unless the RBA imposes an access regime or sets standards for it; designation does not, by itself, remove a system from the ACCC's coverage.

Below is an extract from Media Release - Reform of Credit Card Schemes in Australia – Access Regime - Date 23 Feb 2004 - Number 2004-02" which seems to have absolved the ACCC's responsibility to competition within inter alia the Credit Card Payment Schemes and rested it upon the RBA, under the Payment Systems (Regulation) Act 1998.

1.7        During the same Senate Estimates hearings, officials from the Reserve Bank of Australia (RBA) were also asked about the 'stickiness' of credit card interest rates ('stickiness' meaning that credit card interest rates had not fallen in line with the fall in the RBA cash rate in recent years). Dr Malcolm Edey, RBA Assistant Governor (Financial Systems), noted that there were several factors that might help explain why credit card interest rates had not responded to a falling cash rate, including higher costs of funding (independent of the cash rate) and a repricing of risk in the post-Global Financial Crisis (GFC) period. However, Dr Edey acknowledged that the 'gap seems high and it is hard to explain why it is as large as it is'.[2]

1.8        Dr Edey quite rightly made the point that Australia does not regulate interest rates, and, as such, there is no interest rate regulator. He told the committee that Australia does have 'an ACCC [Australian Competition and Consumer Commission] that can investigate uncompetitive conduct if they see it, but they clearly have not seen it in this market'.[3] It was put to Dr Edey that the issue was not so much whether there was uncompetitive conduct in the market, but whether regulatory settings were conducive to the promotion of sufficient competition to put downward pressure on credit card interest rates.[4] In part, the committee's inquiry has been directed at understanding whether existing regulatory settings in relation to credit cards are appropriate in this respect. More broadly, the committee has sought to determine what might be done to improve competition in the credit card market or otherwise put downward pressure on credit card interest rates.

Below is an extract from SMH article "Banks need reining in, but an act is not the way" on 22 Oct 2010 attributed to Milind Sathye (Professor of Banking and Finance at University of Canberra and previously worked for the Central Bank of India) to the below quotation:

        "Parliament has already conferred powers on the government to control interest rates, under section 50 of the Banking Act 1959."

Below is an extract from Bank Finance and Regulation Survey -  Clayton Utz  2011 - page 15:

"Section 50 of the Banking Act 1959 (Cth) (the Act) currently authorises the Reserve Bank of Australia (RBA), with the approval of the Treasurer, to make regulations controlling the rates of interest payable to or by authorised deposit-taking institutions. The formal power of the RBA to control interest rates by regulations co-exists with the much broader general power of the Governor-General to make regulations under s 71 prescribing matters which are necessary or convenient to be prescribed for giving effect to the Act.  There are no enacted regulations pursuant to s50 of the Act."

I understand that the Reserve Bank's powers and responsibilities are far more extensive than the -

  1.       Bank of England that was not nationalised as Britain's central bank until 1946, which is a corporation wholly owned by the UK government - the 'Corporate governance: Board responsibilities' – SS5/16 (Short form) focus on the Corporates it regulates, with no explicit obligation to best contribute to the peoples of Britain, but rather "...........by maintaining monetary and financial stability"; and

  2.       U.S. Federal Reserve that was established as the United States' central bank in 1913 has the below obligation to "research to increase understanding of the impacts of financial services policies and practices on consumers and communities" in the below item 7. "Promoting Consumer Protection and Community Development.":

                       "The Federal Reserve advances supervision, community reinvestment, and research to increase understanding of the impacts of financial services policies and practices on consumers and communities."

36 years ago when the Campbell Committee recommendations were being implemented, the prospect of a Royal Commission into Unconscionable Conduct within the 'financial services sector' would have been viewed as implausible to those Australians that lived through the lengthy regulated interest rate epoch in Australia's financial history, because -

(i)         the Reserve Bank and its predecessor the Govt. owned, Commonwealth Bank, had increasingly regulated 'with an iron fist in a velvet glove' the commercial banks since 1911 (Chapter 17); and

(ii)        historically when de-regulation resulted in adverse consequences, re-regulation by Australia's 'central bank' ensued.

Below are extracts from print journalist, George Lekakis, succinct, scathing article for THE NEW DAILY on Jun 2, 2015  "Watchdogs quiet as banks gouge credit cards":

Below are two pivotal extracts from Dr Edey's response to the former Federal Senator, Sam Dastyari, that the Writer and seemingly Milind Sathye (Professor of Banking and Finance at University of Canberra and previously worked for the Central Bank of India) dispute:

             "The reason why it has not been looked at is: we do not have an interest rate regulator in Australia. We do not have regulated interest rates. What we do have is an ACCC that can investigate uncompetitive conduct if they see it, but they clearly have not seen it in this market.............................. We do not have laws for the regulation of interest rates."

I understand that the Payments System Board may:

• 'designate' a particular payment system as being subject to its regulation. Designation has no other effect; it is simply the first of a number of steps the Bank must take to exercise its powers;

• determine rules for participation in that system, including rules on access for new participants. Since access is inextricably linked to efficiency the Bank works closely with the Australian Competition and Consumer Commission (ACCC);

• set standards for safety and efficiency for that system that may deal with issues such as technical requirements, procedures, performance benchmarks and pricing;

• direct participants in a designated payment system to comply with a standard or access regime; and

• gather information from a payment system or from individual participants.

with the Payments System Board considering payments systems regulation.

A description of the Australian Prudential Regulation Authority (APRA) - Clayton Utz:

"APRA is a statutory authority which was formed in 1998 to promote the prudent management of financial institutions. Its regulatory function extends to the supervision of banks, life insurers, building societies, credit unions, friendly societies and superannuation funds. APRA has the power to require financial organisations to observe prudential standards, and may intervene, where necessary, to protect the interests of depositors, policy-holders or members. In addition, APRA has far-reaching powers of investigation, intervention and administration."

 

Following a decision by the Payments System Board, the Reserve Bank has today brought credit card schemes in Australia under its regulatory oversight.  It has formally "designated" as payment systems subject to its regulation under the Payment Systems (Regulation) Act 1998, the credit card systems operated in Australia by Bankcard, MasterCard and VISA. Designation is the first step in establishing standards and access regimes for a payment system to deal with public interest issues.

The Payment Systems (Regulation) Act 1998 gives the RBA "extensive powers" to "...gather information from a payment system or from individual participants." which includes Credit Card Issuers due to Reserve Bank bringing credit card schemes in Australia under its regulatory oversight as announced in Media Release 12 April 2001 -  Designation of Credit Card Schemes in Australia which informs that "Designation is the first step in establishing standards and access regimes for a payment system to deal with public interest issues." - "Designation of a payment system occurs only after substantial consultation with participants and after voluntary arrangements have been exhausted."

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Below is an extract from the above Media Release "Designation of Credit Card Schemes in Australia" issued 12 April 2001:

 

            "The Bank will now proceed to establish, in the public interest, standards for the setting of interchange fees and a regime for access to the credit card systems.  However, the standards will not cover the setting of credit card fees and charges to cardholders and merchants, or interest rates on credit card borrowings."

Australia's central bank, with a Board that has been given the backing of strong regulatory powers, unique among central banks, could have Determined Standards to re-impose a maximum interest rate on Credit Cards, or a maximum interest rate for Purchases and a maximum interest rate for Cash Advance, at any time that it wanted to.

APRA is funded largely by the industries that it supervises. 

 

Below are two extracts from Westpac's submission to the Wallis Inquiry, submitted by the then CEO, Bob Joss:

    "Also relevant is the Inquiry’s concern with fairness, or the equitable treatment of the various users of the financial system."

             "Protection of consumers

    On-going monitoring of credit card pricing in anticipation of a substantial inquiry into the effects on consumers of the deregulation of credit card interest rates"

Below is an extract from an article "APRA take the easy road out with risk culture" in The Conversation on October 19, 2016:

"In fact, APRA does make a case why, as prudential regulator, it should consider risk culture:

“APRA’s focus on risk culture reflects its prudential mandate - that as a result of undesirable behaviours and attitudes towards risk-taking and risk management, the viability of an APRA-regulated financial institution itself might be threatened, and this may in turn jeopardise both the institution’s financial obligations to depositors, policyholders or fund members, and financial stability”.

While ASIC’s primary focus is on illegal actions by individuals (and arguably corporations), APRA’s mandate is to consider risks to the whole banking system. However having made the argument, APRA promptly forgets its systemic role and starts dabbling in the same mess that ASIC is trying to clean up, without much success."

3. The RBA's role is focused on the objectives of monetary policy, overall financial system stability and regulation of the payments system. It has no obligation to protect the interests of bank depositors and will not supervise any individual financial institutions. The RBA does, however, have discretion to provide emergency liquidity support to the financial system.

4. APRA is responsible for the prudential supervision of banks, life and general insurance companies and superannuation funds. Supervision of building societies, credit unions and friendly societies will transfer to APRA from State jurisdictions at a later date. APRA has powers to act decisively in the interests of depositors or policy holders and fund members if a supervised institution is in difficulty.

This paper describes the institutional and functional changes that have occurred in Australia’s

system of prudential supervision as a result of the recommendations put forward by the final

report of the Financial System Inquiry chaired by Stanley Wallis. The previous regulatory

framework was organised around institution type, with separate agencies regulating different

classes of institutions. The new regulatory framework distinguishes regulatory agencies by

the type of market failure that they are designed to address. The decision to reform is

explained as an adjustment in response to the influences of technological and demographic

trends and other regulatory reforms that have been driving change in the Australian

financial system. Focus is on the role of the Australian Prudential Regulation

Authority (APRA), the regulatory agency responsible for prudential supervision.

The objectives of APRA are analysed in detail and the powers and

approach used by APRA to achieve these objectives are described.