Among all the bad news to come out of the financial markets, it’s hardly surprising that we are experiencing a crisis of investor confidence in Australia.
In this extraordinary year, we have witnessed the collapse of investment banking giant Lehman Brothers, marking the largest bankruptcy in US history.We have watched the US government intervene to prevent bankruptcies at Bear Stearns and mortgage lenders Fannie Mae and Freddie Mac, and insurer American International Group.
And we have seen banks both at home (BankWest) and abroad (Merrill Lynch) swallowed by their competitors.
Furthermore, volatile global markets have had a significant impact on Australia’s stock market, in part due to its heavy weighting to financials.
Clients are relying on planners to guide them through the maelstrom and out the other side, and some recent positive developments will certainly aid this process.
Prime Minister Kevin Rudd’s announcement on Sunday that all deposits in Australian financial institutions would be guaranteed by the Federal Government for three years should – and the subsequent market rally yesterday indicated it did – instil confidence in investors that at the very least, their hard earned savings are safe.
The pledge follows a series of rescue packages around the globe, with European leaders vowing to pump public money into banks battered by the financial crisis.
The Australian government also doubled the funds available to improve liquidity in financial markets from $4 billion to $8 billion, indicating that like its global counterparts, it is committed to restoring stability in financial markets.
Rudd’s guarantee came just days after the release of a report by the G30 Regulatory Systems Working Group titled The Structure of Financial Supervision: Approaches and Challenges in a Global Marketplace, which singled out the supervisory oversight model used by Australia as closest to ‘optimal’.
The report, which was supported by the Deloitte Center for Banking Solutions, compares the financial regulatory approaches across 17 jurisdictions and identifies the ‘twin peaks’ model used by Australia and the Netherlands as the one that a number of countries are considering adopting.
It highlighted the model as “the optimal means of ensuring that issues of transparency, market integrity, and consumer protection receive sufficient priority”.
In the current debate on how best to tackle global regulatory reform, it will be comforting for clients to know that Australia is on solid ground, and reassuring for them to hear that our regulatory system is one worth striving for.
And in these tough times, clients need all the comfort and reassurance they can get.
