Competition in Financial Services

Abstract

The Centre for International Finance and Regulation and UNSW Australia jointly funded this research under CIFR Project T20. The Centre for International Finance and Regulation is funded by the Commonwealth and NSW Governments and is supported by other Consortium members. The research question for this project was ‘What are the optimal competition law and policy settings that should apply to the financial services sector?’

The research question was driven by two Australian Government inquiries which will affect competition policy in the financial services sector: the Financial System Inquiry chaired by David Murray and the Competition Policy Review, chaired by Professor Ian Harper.

The project has three objectives.

The first is to investigate the nature of competition in certain sectors of the financial markets. Meeting this objective will provide Australian evidence on which decisions as to the competitive settings in the sector can, or should be, adjusted.

The second is to consider the mechanisms by which competition in the financial services sector can be promoted. This includes an analysis of the approaches used on an international basis for the promotion of competition in financial services. Meeting this objective will provide evidence on which decisions as to allocation of responsibility for promoting competition can be made.

The third is to consider the sector-specific competition settings in the financial sector, including the balance between competition and stability. As the global financial crisis did not provide Australia with direct experience of the practical limitations of this balance, the work investigates theoretical approaches and international experience. Meeting this objective will provide evidence for appropriate policy settings if there are to be any sector-specific competition policy exemptions.
Research.

Keywords: Centre for International Finance and Regulation, CIFR, UNSW, T20, competition law, financial services, Financial System Inquiry, David Murray, Competition Policy Review, Ian Harper, financial markets