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Restoring Confidence in Consumer Financial Protection Regulation in Australia: A Sisyphean Task?

Published online by Cambridge University Press:  01 January 2025

Andrew Schmulow ,
Karen Fairweather  and
John Tarrant
Andrew Schmulow*
Affiliation:
Supreme Court of Victoria; Oliver Schreiner School of Law, University of the Witwatersrand, Johannesburg; Centre for International Trade, Sungkyunkwan University, Seoul; School of Law, Faculty of Law, Humanities and the Arts, University of Wollongong
Karen Fairweather*
Affiliation:
Auckland Law School, University of Auckland
John Tarrant*
Affiliation:
Law School, University of Western Australia
*
The author may be contacted at andys@uow.edu.au.
The author may be contacted at k.fairweather@auckland.ac.nz.
The author may be contacted at john.tarrant@uwa.edu.au.
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Abstract

Consumer financial protection and the integrity of the Australian financial system are critical to the Australian economy in many ways, including the provision of an effective banking system, and the security of Australia’s significant superannuation savings. This is especially the case in an environment where financial products have become more complex and difficult for consumers to understand. In recent years there have been several scandals in Australia’s financial sector that have undermined confidence in the financial system, and exposed regulatory failure. The authors argue that there needs to be a more effective oversight of the key regulators in the Australian financial system to maintain confidence in the system, and prevent capture of the regulators by the financial services industry. The authors contend that the recommendation of the Financial System Inquiry for the establishment of an Assessment Board to provide continuous oversight of the financial regulators is an effective solution to the poor regulatory outcomes encountered in Australia in recent years. The consequences of not having such oversight are likely to be more financial scandals, and further instability in the financial system. These deficiencies must be addressed as a matter of urgency.

Type
Articles
Information
Federal Law Review , Volume 47 , Issue 1 , March 2019 , pp. 91 - 120
Copyright
Copyright © 2019 The Author(s)

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References

Notes

1 ‘Consumer’ here encompasses the functionally similar concepts of the consumer (used in the consumer credit context in the National Consumer Credit Protection Act 2009 (Cth) (‘NCCPA’)—see NCCPA, s 5) and the ‘retail client’ (used in the financial services regulation context—see Corporations Act 2001 (Cth) s 761G (‘CA’)).

2 ASIC was originally established in 1991 as the Australian Securities Commission (‘ASC’). Its remit was originally the administration and enforcement of the corporations legislation. The ASC was renamed ASIC on 1 July 1998, when its remit was extended to the protection of consumers in the financial sector. This remit was further expanded in July 2010, when it became the regulator of the new national regime for consumer credit regulation under the NCCPA.

3 For detailed discussion, including a chronology of events, see Senate Economics References Committee, Parliament of Australia, Performance of the Australian Securities and Investments Commission (2014) ch 8 (‘ASIC Inquiry’).

4 Also referred to as the bank bill swap reference rate (‘BBSW’).

5 In 2016, ASIC finally brought proceedings against the Australian and New Zealand Bank, National Australia Bank and Westpac in relation to unconscionable conduct and market manipulation alleged to have occurred between 2010 and 2012.

6 On the Commonwealth Bank (CommInsure) life insurance scandal, see http://www.smh.com.au/interactive/2016/comminsure-exposed/heart-attack/; http://www.smh.com.au/interactive/2016/comminsure-exposed/mental-health/?%20prev=1; http://www.smh.com.au/interactive/2016/comminsure-exposed/terminal-illness/?%20prev=2.

7 The financial planning arm of the Commonwealth Bank.

8 After media reports of widespread misconduct of financial advisors at CFPL in 2012 and 2013, the Senate Economics Legislation Committee questioned ASIC in June 2013. ASIC’s failure to provide satisfactory answers caused the Senate, on 20 June 2013, to refer ASIC’s performance to the Economic References Committee for inquiry and report by 31 March 2014. Misconduct amongst financial advisers at Macquarie Private Wealth that came to light in 2013 was also considered by the Committee.

9 ASIC Inquiry, above n 3. Although spectacular, the CFPL scandal was a far from isolated instance of ASIC allegedly failing to take timely, effective action. In a 2009 inquiry, the Joint Parliamentary Committee on Corporations and Financial Services highlighted the delay in ASIC’s investigations into Storm Financial’s collapse, noting that a more proactive regulator might have identified the problems with Storm’s practices earlier, thereby limiting the losses ultimately suffered by investors: Parliamentary Joint Committee on Corporations and Financial Services, Parliament of Australia, Inquiry into Financial Products and Services in Australia (2009) 43–4 [3.99], 49 [3.122] (‘Inquiry into Financial Products and Services’). A class action, alleging negligence and misfeasance in public office brought by Storm investors against ASIC in 2014 was ultimately struck out by the Federal Court in 2016: Lock v Australian Securities and Investments Commission (2016) 248 FCR 547.

10 ASIC Inquiry, above n 3, xviii.

11 Ibid xvii.

12 Ibid 455 [28.10].

13 Ibid 278 [17.47].

14 Commonwealth, Financial System Inquiry, Final Report (2014) (‘Financial System Inquiry’).

15 Michael E Levine, ‘Regulatory Capture’ in Peter Newman (ed), The New Palgrave Dictionary of Economics and the Law (Palgrave McMillan, 1998) 267, 267. ‘Regulatory capture’ is often used more narrowly. See, eg, Richard Posner, ‘The Concept of Regulatory Capture: A Short, Inglorious History’ in Daniel Carpenter and David A Moss (eds), Preventing Regulatory Capture: Special Interest Influence and How to Limit It (Cambridge University Press, 2014) 49, 49: ‘The term regulatory capture, as I use it, refers to the subversion of regulatory agencies by the firms they regulate. This is to be distinguished from regulation that is intended by the legislative body that enacts it to serve the private interests of the regulated firms, for example by shielding them from new entry. Capture implies conflict, and regulatory capture implies that the regulated firms have, as it were, made war on the regulatory agency and won the war, turning the agency into their vassal’.

16 See Daniel Carpenter, ‘Detecting and Measuring Capture’ in Daniel Carpenter and David A Moss (eds), Preventing Regulatory Capture: Special Interest Influence and How to Limit It (Cambridge University Press, 2014) 57, 59–60. Agency capture may be present in conjunction with legislative capture (often, it is claimed, as a result of the legislature’s ability to control the regulatory agency), or it may appear in isolation.

17 Samuel P Huntington, ‘The Marasmus of the ICC: The Commission, the Railroads, and the Public Interest’ (1952) 61 Yale Law Journal 467.

18 Marver H Bernstein, Regulating Business by Independent Commission (Greenwood Press, 1955).

19 Huntington’s focus had been the Interstate Commerce Commission. Bernstein’s study also included the Federal Trade Commission, Federal Power Commission, Civil Aeronautics Board, Federal Communications Commission, National Labor Relations Board and the Securities and Exchange Commission.

20 Bernstein, above n 18, 80.

21 Ibid 88.

22 Ibid 87.

23 Ibid.

24 Ibid 88.

25 Ibid 91–5.

26 Ibid 293.

27 See George J Stigler, ‘The Theory of Economic Regulation’ (1971) 2 Bell Journal of Economics and Management Science 3.

28 The novelty of public choice theory lay in the application of economic analysis (hitherto used to explain only the operation of private markets) to political decision-making. The theory posits that, as rational wealth-maximisers, ‘public choosers’—politicians, voters and bureaucrats—are motivated by the same self-interest as actors in private markets. See James M Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy (University of Michigan Press, 1962); Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (Harvard University Press, 1965). There is debate as to whether Olson should be considered a member of the Virginia School. Some consider Olson’s approach sufficiently distinct to merit the label ‘Maryland School’: see Jac C Heckelman and Dennis Coates, ‘On the Shoulders of a Giant: The Legacy of Mancur Olson’ in Jac C Heckelman and Dennis Coates (eds), Collective Choice: Essays in Honor of Mancur Olson (Springer, 2003) 1, 6–8. Although Stigler’s economic theory of regulation incorporated many of the insights of these public choice theorists, it made no express reference to their work.

29 Arthur Pigou is generally considered the founder of public interest theories: see Arthur Pigou, The Economics of Welfare (Macmillan, 1920).

30 Stigler, above n 27, 3.

31 George J Stigler, ‘Old and New Theories of Regulation’ in George J Stigler (ed), The Citizen and the State: Essays on Regulation (University of Chicago Press, 1975) 137, 140.

32 Richard A Posner, ‘Theories of Economic Regulation’ (1974) 5 Bell Journal of Economics and Management Science 335, 344.

33 According to Stigler, ‘The Theory of Economic Regulation’ above n 27, the four regulatory products for sale were subsidies, control over entry to a market by new rivals, the regulation of product substitutes and complements, and price-fixing.

34 Typically money, for example in the form of campaign contributions, which could purchase votes indirectly.

35 Stigler, ‘Old and New Theories of Regulation’, above n 31, 140.

36 See, eg, Ann Bartel and Lacy Glenn Thomas, ‘Predation through Regulation’ (1987) 30 Journal of Law and Economics 239; Lacy Glenn Thomas, ‘Regulation and Firm Size: FDA Impacts on Innovation’ (1990) 21 RAND Journal of Economics 497; W Kip Viscusi, Fatal Tradeoffs (Oxford University Press, 1992) 177.

37 Stigler, ‘The Theory of Economic Regulation’, above n 27, 17, observing that to criticise the Interstate Commerce Commission (‘ICC’) for its pro-railroad policies was ‘exactly as appropriate as a criticism of the Great Atlantic and Pacific Tea Company for selling groceries, or as a criticism of a politician for currying favour’.

38 Steven P Croley, Regulation and Public Interests: The Possibility of Good Regulatory Government (Princeton University Press, 2007) 19–20.

39 For elaboration on this point, see Posner, above n 32, 337–9.

40 For subsequent contributions of the Chicago School, see Sam Peltzman, ‘Toward a More General Theory of Regulation’ (1976) 19 Journal of Law and Economics 211; Sam Peltzman, ‘The Economic Theory of Regulation after a Decade of Deregulation’ [1989] Brookings Papers in Macroeconomics 1; Gary Becker. ‘A Theory of Competition among Pressure Groups for Political Influence’ (1983) 98 Quarterly Journal of Economics 371. Jessica Light, ‘Public Choice: A Critical Reassessment’ in Edward Balleisen and David Moss (eds), Government and Markets: Toward a New Theory of Regulation (Cambridge University Press, 2010) 213. On the differences between the Chicago and Virginia strands of public choice theory, see: Neil Gunningham, ‘Public Choice: The Economic Analysis of Public Law’ (1992) 21 Federal Law Review 117, 120–31; William C Mitchell, ‘The Old and New Public Choice: Chicago versus Virginia’ in William F Shughart II and Laura Razzolini (eds), The Elgar Companion to Public Choice (Edward Elgar, 2001).

41 See, eg, George W Hilton, ‘The Basic Behavior of Regulatory Commissions’ (1972) 62 The American Economic Review 47, 48 for an early revolving-door argument: ‘Since employment in the regulated industry is one of the most obvious opportunities after a regulator’s term in office, alienating members of the regulated industry may prove very costly to a member of a commission’. This is the incentive most commonly discussed in relation to agency capture. However, it has also been claimed that fears of potential reputational and career damage from firms making complaints or spreading negative rumours about the employee-regulator’s competence, might induce them to keep firms happy. For an overview of these claims, see Ernesto dal Bó, ‘Regulatory Capture: A Review’ (2006) 22 Oxford Review of Economic Policy 203, 212.

42 Croley, above n 38, 27.

43 See Light, above n 40, describing the public choice theory of regulation as the dominant view.

44 In this respect, the public choice theory was a victim of its own success. As Kahn has observed, ‘After all, why should the logic of deregulation differ from the logic which explains regulation? Why, then, do deregulatory movements succeed, if special interest groups oppose them? Either the successes of the deregulatory movement indicate that some public-regarding political outcomes succeed for reasons not explained by the model, or that the political environment must have changed so that deregulation now serves the same private interests which once sought regulation. And if this is so, self-serving behavior on occasion coincides with the public interest. The success of the deregulatory movement demonstrates the limits of the model in prescribing policy’: Peter L Kahn, ‘The Politics of Unregulation: Public Choice and Limits on Government’ (1990) 75 Cornell Law Review 280, 286–7.

45 See James M Buchanan’s comments on the neglect of public choice theory in the United Kingdom in ‘From Private Preferences to Public Philosophy: The Development of Public Choice’ in James M Buchanan et al (eds), The Economics of Politics (Institute of Economic Affairs, 1978) 1, 4. On the reception of public choice theory in the UK, see Noel Thompson, ‘Hollowing Out the State: Public Choice Theory and the Critique of Keynesian Social Democracy’ (2008) 22 Contemporary British History 355, 369–74.

46 From the late 1970s onwards, the Institute commissioned basic introductions to public choice theory for UK readers from leading American scholars, often with additional commentary explaining the theory’s relevance in the UK context. Examples include Gordon Tullock, ‘The Vote Motive’ (Hobart Paperback no 9, Institute of Economic Affairs, 1976), with a British commentary by Morris Perlman; H Geoffrey Brennan and James M Buchanan, ‘Monopoly in Money and Inflation’ (Hobart Paper no 8, Institute of Economic Affairs, 1981); William C Mitchell, ‘Government As It Is’ (Hobart Paper no 109, Institute of Economic Affairs, 1988) with a Commentary on the British Scene by David G Green.

47 See the warning of McAuslan in 1988 that: ‘Public choice is influencing public policy, both in substance and…design. The intellectual community is in danger of being left behind; dismissive of public choice a few years back, it now runs the risk of being dismissed by public choicists—perhaps even literally—as having little to offer either public debate or policies on the future direction and shape of the British polity’: Patrick McAuslan, ‘Public Law and Public Choice’ (1988) 51 Modern Law Review 681, 684. A notable exception was Patrick Dunleavy, ‘Explaining the Privatisation Boom: Public Choice Versus Radical Approaches’ (1986) 64 Public Administration 13.

48 See Thompson, above n 45, 371, noting echoes of public choice theory in Thatcher’s speeches, references to public choice literature in the bibliographies accompanying edited editions of her speeches, and suggesting that it was through her closest advisor, Keith Joseph, that she acquired an awareness of public choice literature.

49 For a rare early account of public choice theory in the Australian literature, see Gunningham above n 40.

50 See, eg, Jonathan Pincus, ‘Public Choice Theory had Negligible Effect on Australian Microeconomic Policy, 1970s to 2000s’ (2014) 59 History of Economics Review 82, arguing that public choice theory played a negligible role, at most, in the pro-competitive shift that occurred from the mid-1960s onwards in Australia.

51 For a recent critical account, see Light, above n 40, 230–8.

52 See the evaluation of Gunningham, n 40, 134.

53 See Daniel Carpenter and David A Moss ‘Introduction’ in Daniel Carpenter and David A Moss (eds), Preventing Regulatory Capture: Special Interest Influence and How to Limit It (Cambridge University Press, 2014) 1, 7.

54 See Croley, above n 38, ch 3.

55 See, eg, Robert Weisman and James Donohue, ‘Sold Out: How Wall Street and Washington Betrayed America’ (Essential Information Report, Consumer Education Foundation, March 2009); Andrew Baker, ‘Restraining Regulatory Capture? Anglo-America, Crisis Politics and Trajectories of Change in Global Financial Governance (2010) 86 International Affairs 647; Simon Johnson and James Kwak, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (Pantheon, 2010); James R Barth, Gerard Caprio and Ross Levine, Guardians of Finance: Making Regulators Work for Us (MIT Press, 2012).

56 See Carpenter and Moss, above n 53, 16–17.

57 Ibid. Corrosive capture is defined as that which ‘occurs if organized firms render regulation less robust than intended or than what the public interest would recommend. By less robust we mean that the regulation is, in its formulation, application, or enforcement, rendered less stringent or less costly for regulated firms (again, relative to a world in which the public interest would be served by the regulation in question)’. As Carpenter and Moss note, most of the more recent work on regulatory capture has been concerned with the corrosive variety.

58 James Kwak, ‘Cultural Capture and the Financial Crisis’ in Daniel Carpenter and David A Moss, Preventing Regulatory Capture: Special Interest Influence, and How to Limit It (Cambridge University Press, 2014) 71.

59 See Willem H Buiter, ‘Central Banks and Financial Crises’ (Financial Markets Group Discussion Paper no 619, London School of Economics, September 2008) 39, talking in terms of ‘cognitive regulatory capture’ whereby regulators internalised ‘as if by osmosis, the objectives, interests and perception of reality of the vested interest they are meant to regulate’. See also the comments of Lord Adair Turner, former Chairman of the United Kingdom’s Financial Services Authority, acknowledging the concept of ‘cognitive capture’ and the difficulties regulators have in resisting it in an interview with the Financial Crisis Inquiry Commission (November 30, 2010) <http://fcic.law.stanford.edu/interviews/view/102>.

60 See, eg, The Warwick Commission, Warwick Commission on International Financial Reform: In Praise of Unlevel Playing Fields, The Report of the Second Warwick Commission (The University of Warwick, 2016) 7, 28.

61 On the evidence of deep capture in the US financial regulatory system, see Lawrence G Baxter, ‘Capture in Financial Regulation: Can We Channel It Toward the Common Good?’ (2011) 21 Cornell Journal of Law and Public Policy 175, 184–6. On the concept of deep capture generally, see Jon Hanson and David Yosifon, ‘The Situation: An Introduction to the Situational Character, Critical Realism, Power Economics, and Deep Capture’ (2003) 152 University of Pennsylvania Law Review 129, 202–84.

62 Johnson and Kwak, above n 55, 93.

63 See, eg, Carol A Needham, ‘Listening to Cassandra: The Difficulty of Recognising Risks and Taking Action’ (2010) 78 Fordham Law Review 2329, 2347–55, discussing the role cognitive biases played in the Federal Reserve Bank’s January 1998 decision that it would neither conduct routine consumer compliance of, nor investigate consumer complaints about, non-bank mortgage originators (and its subsequent refusal to depart from that decision in the face of the widespread abusive lending practices during the housing bubble).

64 See, eg, Wendy Wagner, ‘Administrative Law, Filter Failure, and Information Capture’ (2010) 59 Duke Law Journal 1321, describing the phenomenon of ‘information capture’, which involves inundating an agency with complex information with a view to achieving the desired regulatory outcomes.

65 Kwak, above n 58, 77–8. For a sceptical view, see David Freeman Engstrom, ‘Corralling Capture’ (2013) 36 Harvard Journal of Law and Public Policy 33, arguing that this ‘non-materialist account of capture begins to resemble, upon further examination, the marketplace of ideas. Some ideas win out; some do not’ and that it ‘suggests that, when deploying the concept of capture, it is quite easy to lose focus to the point where we are not talking about much at all’.

66 Daniel Carpenter, David Moss and Melanie Wachtell-Stinnett, ‘Lessons for the Financial Sector’ from ‘Preventing Regulatory Capture: Special Interest Influence, and How to Limit it’, 71 in Stefano Pagliari (ed), Making Good Financial Regulation: Towards a Policy Response to Regulatory Capture (Grosvenor House Publishing, 2012) 70.

67 In 2010, the Tobin Project launched its research project, ‘Preventing Regulatory Capture’, see The Tobin Project, Preventing Regulatory Capture: Special Interest Influence and How to Limit It (2017) <http://tobinproject.org/research-inquiry/government-markets/featured-inquiry-preventing-capture>. See also similar work in the UK context under the auspices of the International Centre for Financial Regulation (2009–12): Stefano Pagliari (ed), Making Good Financial Regulation: Towards a Policy Response to Regulatory Capture (Grosvenor House, 2012).

68 ‘Strong’ capture has been defined as capture that ‘violates the public interest to such an extent that the public would be better served by either (a) no regulation of the activity in question—because the benefits of regulation are outweighed by the costs of capture, or (b) comprehensive replacement of the policy and agency in question: Carpenter and Moss, above n 53, 11.

69 ‘Weak’ capture is said to occur ‘when special interest influence compromises the capacity of regulation to enhance the public interest, but the public is still being served by regulation, relative to the baseline of no regulation’: ibid 12.

70 Ibid.

71 Ibid 18.

72 For an interesting review of Preventing Regulatory Capture, describing the history of capture scholarship as an example of ‘the authority of social science research being forged into rhetorical weaponry suitable for political battle’, see Philip Wallach, ‘What Is Regulatory Capture, Review of Preventing Regulatory Capture: Special Interest Influence and How to Limit It’ by Daniel Carpenter and David A Moss http://newramblerreview.com/book-reviews/political-science/what-is-regulatory-capture, last accessed 8 July 2017.

73 See Lawrence G Baxter, ‘Capture Nuances in Financial Regulation’ (2012) 47 Wake Forrest Law Review 537, 551–7.

74 Ibid 551.

75 See Arthur E Wilmarth Jr, ‘Turning a Blind Eye: Why Washington Keeps Giving in to Wall Street’ (2013) 81 University of Cincinnati Law Review 1283, 1294.

76 Baxter, above n 73, 560.

77 Stefano Pagliari, ‘How Can We Mitigate Capture in Financial Regulation?’ in Stefano Pagliari (ed), Making Good Financial Regulation: Towards a Policy Response to Regulatory Capture (Grosvenor House, 2012) 1, 14.

78 See dal Bó, n 41, 214–15. For examination of the revolving door phenomenon, with particular reference to the financial crisis, see Organisation for Economic Co-Operation and Development, Revolving Doors, Accountability and Transparency: Emerging Regulatory Concerns and Policy Solutions in the Financial Crisis GOV/PGC/ETH(2009)2, (OECD, 2009).

79 See Organisation for Economic Cooperation and Development, Post-Public Employment: Good Practices for Preventing Conflict of Interest GOV/PGC(2008)20 (OECD, 2008) 16–17.There is a long-standing debate on whether firms hire ex-regulators to obtain preferential regulatory treatment (the ‘quid pro quo’ hypothesis) or for their expertise (the ‘regulatory schooling’ hypothesis). For a recent discussion, see David Lucca, Amit Seru and Francesco Trebbi, ‘The Revolving Door and Worker Flows in Banking Regulation’ Staff Reports no 678 (Federal Reserve Bank of New York, 2014); Sophie A Shive and Margaret M Forster, ‘The Revolving Door for Financial Regulators’ (2017) 21 Review of Finance 1445.

80 Baxter, ‘Capture in Financial Regulation: Can We Channel It Toward the Common Good?’, above n 61, 187.

81 For example, the Federal Reserve Bank of New York located teams of examiners (including ‘relationship managers’) on-site in offices within the large banks they regulate on a full-time basis. In 2016, it took the decision to move most of these employees back to Federal Reserve premises after an investigation into regulatory capture was launched by the Government Accountability Office.

82 Baxter, ‘Capture in Financial Regulation: Can We Channel It Toward the Common Good?’, above n 61, 187.

83 OECD, above n 78, [66]–[69]. There was a particularly strong incidence of previous employment with one law firm with a long association with the banking sector. Of 34 senior employees identified in the report, only six had no revolving-door connections. Eleven had formerly worked for corporate law firms, seven for banks or other financial institutions, six as accountants or auditors in corporate auditing firms, two in finance lobby groups, two in other corporate sectors and just one had worked in a ‘public interest’ law centre.

84 Australian Securities and Investments Commission, ASIC Senior Executives (21 September 2018) <http://asic.gov.au/about-asic/what-we-do/our-structure/asic-senior-executives/>.

85 Ben Butler, EXCLUSIVE, How Big Banks Managed to Massage ASIC Message’, The Australian, 19 April 2017.

86 Ibid.

87 Michael West, ‘Watching the Watchdog: Secondments spell trouble at ASIC’, Sydney Morning Herald (online), 24 February 2015 <https://www.smh.com.au/business/banking-and-finance/watching-the-watchdog-secondments-spell-trouble-at-asic-20150224-13n6xb.html>.

88 Australian Securities and Investments Commission, ‘ASIC to impose licence conditions on two Commonwealth Bank financial planning businesses’ (Media Release, 14-104MR, 16 May 2014) <http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-104mr-asic-to-impose-licence-conditions-on-two-commonwealth-bank-financial-planning-businesses/>.

89 Commonwealth, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Module 5: Superannuation Closing Submissions (24 August 2018) 217–18 [820].

90 International Monetary Fund, ‘Australia: Financial System Stability Assessment’ (IMF Country Report No 12/308, Washington DC, 2012) 25–6.

91 See the submissions cited in ASIC Inquiry, above n 3, [25.6]–[25.7].

92 Commonwealth, Financial System Inquiry, above n 14, 247.

93 See ASIC Inquiry, above n 3, [17.13]–[17.16].

94 See, for example, Ian Ramsay and Miranda Webster, ‘ASIC Enforcement Outcomes: Trends and Analysis’ (2017) 35(5) Company and Securities Law Journal 289.

95 Former Chairman of the Trade Practices Commission.

96 Robert Baxt, Submission No 189 to Senate Standing Committee on Economics, Parliament of Australia, Inquiry into the Performance of the Australian Securities and Investments Commission, 28 October 2013, 6–7.

97 Rather it flatly denied any reluctance to take action against big businesses: see Greg Medcraft, ‘Senate Inquiry into the Performance of ASIC: Opening Statement February 2014’ (Speech delivered at the Senate Inquiry into the Performance of ASIC, 10 April 2014) <https://asic.gov.au/about-asic/media-centre/speeches/senate-inquiry-into-the-performance-of-asic-opening-statement-february-2014/> claiming that ‘we act without fear or favour irrespective of the size of the organisation’ and ‘ASIC action occurs across the spectrum regardless of entity size’.

98 ASIC Inquiry, above n 3, [17.33].

99 Senior Executive Leader, Strategy Group.

100 Thus the files would have to be reconstructed.

101 ASIC Inquiry, above n 3, [11.47].

102 ASIC Inquiry, above n 3, 166.

103 A new ‘user-pays’ industry funding model for ASIC came into effect in July 2017: see ASIC Supervisory Cost Recovery Levy Act 2017 (Cth). However, a $26 million cut of its permanent Government funding was announced in the May 2018 budget. It was expected that staffing levels would be reduced by 2 per cent, or about 30 positions: see Eryk Bagshaw, ‘Banking Regulator ASIC Hit by $26 m Funding Cut’, The Age (Melbourne), 11 May 2018, 7.

104 A review of ASIC’s enforcement regime was initiated in 2016. The ASIC Enforcement Review Taskforce reported in December 2017: Treasury, Commonwealth of Australia, ASIC Enforcement Review Taskforce Report (2017). The Government responded to the Report in April 2018, but is awaiting the findings of the Royal Commission before reaching final conclusions on a number of the Taskforce’s recommendations.

105 Andrew Sheng, ‘Regulatory Capture: A Former Regulator’s Perspective’ in Stefano Pagliari (ed), Making Good Financial Regulation: Towards a Policy Response to Regulatory Capture (Grosvenor House Publishing, 2012) 158. Mr Sheng is former Chairman of the Hong Kong Securities and Futures Commission.

106 ASIC Inquiry, above n 3; Inquiry into Financial Products and Services, above n 9; Financial System Inquiry, above n 14, 193–232; 233–60 233 ff.

107 Adele Ferguson, ‘Hearing into ASIC’s failure to investigate CBA’s Financial Wisdom’, Sydney Morning Herald (online), 3 June 2014 <http://www.smh.com.au/business/hearing-into-asics-failure-to-investigate-cbas-financial-wisdom-20140602-39ept.html>; Banking Bad (Australian Broadcasting Corporation, 2014); Adele Ferguson, ‘Sweating on every word—how ASIC massaged the banking message’, Sydney Morning Herald (online), 21 April 2017 <http://www.smh.com.au/business/banking-and-finance/sweating-on-every-word--how-asic-massaged-the-banking-message-20170421-gvp9%20qt.html>; Pat McConnell, ‘ASIC’s Fashion Faux-Pas’, The Conversation (online), 13 July 2015 <https://theconversation.com/asics-fashion-faux-pas-44590>; Andrew Schmulow, ‘Time for Abbott Government and ASIC to get serious about Australian banksters’, Independent Australia (online), 10 August 2015 <https://independentaustralia.net/business/business-display/time-for-asic-and-other-regulators-to-get-serious-about-australian-banksters,8036>.

108 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, <https://financialservices.royalcommission.gov.au/Pages/default.aspx>

109 Royal Commission—Banks and Financial Services, 30 November 2017, Office of the Prime Minister of Australia, <http://sjm.ministers.treasury.gov.au/media-release/124-2017/>.

110 Banking and Financial Services Commission of Inquiry Bill 2017 (Cth).

111 Matthew Burgess and Jason Scott, ‘Turnbull’s Win May Lift Ailing Government After Tough 2017’, Bloomberg (online), 18 December 2017 <https://www.bloomberg.com/news/articles/2017-12-17/turnbull-s-win-may-kick-start-ailing-government-after-tough-2017>.

112 Jared Owens, ‘Bill Shorten continues banking royal commission campaign’, The Australian (online), 15 August 2016 <https://www.theaustralian.com.au/national-affairs/bill-shorten-continues-banking-royal-commission-campaign/news-story/393eb060ae196a311907284b4befe1ef>.

113 See Financial System Inquiry, above n 14, 244.

114 Joanna Mather and James Eyers, ‘APRA delivers banks $1b windfall: Productivity Commission’, Australian Financial Review (online), 7 February 2018 <http://www.afr.com/business/banking-and-finance/financial-services/apra-delivers-banks-1b-windfall-productivity-commission-20180206-h0ulfe>.

115 Peter Harris, Julie Abramson and Stephen King, ‘Competition in the Australian Financial System, Draft Report’, Government of Australia, Productivity Commission (2018).

116 Finding 3.2, Productivity Commission, Competition in the Australian Financial System, Productivity Commission, Inquiry Report (Final) No 89 (2018), 38.

117 Mather and Eyers, above n 114.

118 Harris, Abramson and King, above n 115, 465–516 469ff; 479 ff.

119 The Interim Report, Residential Mortgage Price Inquiry, was issued in March 2018. Australian Competition and Consumer Commission, Residential Mortgage Price Inquiry—Interim Report, Commonwealth of Australia (2018).

120 Stephen Letts, ‘ANZ, NAB agree to $100 million settlement of swap rate rigging case’, ABC News (online), 10 November 2017 <http://www.abc.net.au/news/2017-11-10/anz-nab-agree-to-$100m-settlement-of-swap-rate-fixing-case/9138796>.

121 Stephen Letts and Michael Janda, ‘Westpac engaged in unconscionable conduct but failed to rig BBSW interest rate, court finds’, ABC News (online), 24 May 2018 <http://www.abc.net.au/news/2018-05-24/westpac-rate-rigging-case/9794944>.

122 Ibid.

123 Criminal Code Act 1995 (Cth).

124 Allens Arthur Robinson, ‘“Corporate Culture” as a Basis for the Criminal Liability of Corporations’ (Research Paper prepared for the United Nations Special Representative of the Secretary-General on Human Rights and Business, 2008) 10 ff.

125 Ibid 16.

126 Australian Prudential Regulation Authority, ‘APRA releases CBA Prudential Inquiry Final Report and accepts Enforceable Undertaking from CBA’ (Media Release, 1 May 2018); John F. Laker, Jillian Broadbent and Graeme Samuel, Prudential Inquiry into the Commonwealth Bank of Australia (CBA) Final Report, Australian Prudential Regulation Authority, Commonwealth of Australia (2018); Jonathan Shapiro, ‘What boards and executives can learn from APRA’s scathing CBA report’, Australian Financial Review (online), 1 May 2018 <https://www.afr.com/business/banking-and-finance/financial-services/what-boards-and-executives-can-learn-from-apras-scathing-cba-report-20180501-h0zhls>.

127 Shanahan Leo and Michael Roddan, EXCLUSIVE, ‘CBA was “aware” of risk shortfall’, The Australian, 2 September 2017.

128 Peter Ryan, ‘APRA launches scathing criticism of Commonwealth Bank, Scott Morrison puts boards on notice’, ABC News (online), 1 May 2018 <http://www.abc.net.au/news/2018-05-01/cba-forced-to-put-aside-a-billion-dollars-extra-by-apra/9713646>.

129 Australian Competition and Consumer Commission, ‘Residential Mortgage Price Inquiry—Interim Report’, Commonwealth Government of Australia (2018), 8–9 ff.

130 Anthony Klan, ‘APRA “captured by major banks”’, The Australian (online), 23 July 2017, 1

131 Michael Roddan, ‘ACCC in parallel rate-rigging probe’, The Australian (online) 2 March 2018, 22.

132 See for example, Pat McConnell, ‘ASIC finally pulls the BBSW trigger on ANZ’, The Conversation (online), 4 March 2016 <https://theconversation.com/asic-finally-pulls-the-bbsw-trigger-on-anz-55766>; Andrew Schmulow, ‘To clean up the financial system we need to watch the watchers’, The Conversation (online), 4 March 2015 <http://theconversation.com/to-clean-up-the-financial-system-we-need-to-watch-the-watchers-38359>; Andrew Schmulow, ‘Why rigging of the bank bill swap rate hurts everyone’, The Conversation (online), 9 March 2016 <https://theconversation.com/why-rigging-of-the-bank-bill-swap-rate-hurts-everyone-55826>; Andrew Schmulow, ‘Fancy dress financial regulators ASIC and APRA must go’, The Age (online), 31 May 2016 <http://www.theage.com.au/business/banking-and-finance/fancy-dress-financial-regulators-asic-and-apra-must-go-20160531-gp89dp.html>.

133 Andrew Schmulow, ‘New laws on bankers behaving badly don’t matter in light of ASIC inaction’, The Conversation (online), 5 October 2016 <http://theconversation.com/new-laws-on-bankers-behaving-badly-dont-matter-in-light-of-asic-inaction-66497>.

134 John Durie, ‘Regulator bares its teeth’, The Australian (online), 16 July 2016, 37 <http://search.ebscohost.com.ezproxy.library.uwa.edu.au/login.aspx?%20direct=true&db=nfh&AN=9X9AUSNEWSMMGLSTRY000158713462&site=ehost-live>.

135 Above n 129, 36.

136 Australian Prudential Regulation Authority, ‘APRA announces ‘unquestionably strong’ capital benchmarks’ (Media Release, 19 July 2017).

137 Stephen Letts, ‘Banks accept APRA’s home loan crackdown because it boosts profits’ ABC News (online), 11 April 2017 <http://www.abc.net.au/news/2017-04-11/why-tougher-apra-rules-do-not-worry-banks/8421804>.

138 See also, Ian Ramsay and Miranda Webster, ‘ASIC Enforcement Outcomes: Trends and Analysis’ (2017) 35(5) Company and Securities Law Journal 289, particularly graph 12, 304, which demonstrates ASIC’s overwhelming predilection for bringing criminal sanctions only against small businesses. Indeed the same research indicates that in the case of the financial services industry, ASIC relies almost entirely upon ‘administrative remedies’ followed by ‘enforceable undertakings/negotiated outcomes’.

139 James R Barth, Gerard Caprio and Ross Levine, above n 55, 203–32. Barth et al acknowledge the precursor to this idea, put forward by Adams in a series of articles (see, eg, Adams, Jr., Charles Francis, ‘Boston’ [1] (1868) 106 (218) 1), and discussed in McCraw (Thomas K McCraw, Prophets of Regulation: Charles Francis Adams; Louis D. Brandeis; James M. Landis; Alfred E. Kahn (Harvard University Press, 1986) 15), of a ‘Sunshine Commission’: ‘a commission that would shed the cleansing light of disclosure on the hitherto secret affairs of business corporations’.. What Marshall J Breger et al refer to as ‘[A]n impartial body of experts that would investigate, examine, and report on railroad activities but would not have enforcement power’. Marshall J Breger and Gary J Edles, Independent Agencies in the United States: Law, Structure, and Politics (Oxford University Press, 2015) 27. See above n 77, 1–49, 4, for a proposal along similar lines for an ‘Expert Review Panel’.

140 Barth, Caprio and Levine, above n 55, 204.

141 Ibid 203.

142 Ross Levine, ‘The governance of financial regulation: reform lessons from the recent crisis’ (Working Paper, Bank for International Settlements, 2010) 2.

143 Ibid.

144 Ibid.

145 Ibid.

146 Ibid.

147 Ibid.

148 See, eg, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 (Cth).

149 See Frederic S Mishkin, ‘Over the Cliff: From the Subprime to the Global Financial Crisis’ (Working Paper No 16609, National Bureau of Economic Research, 2010); Paul G Mahoney, ‘Deregulation and the Subprime Crisis’ (Draft Paper, Law, Economics, & Business Workshop, Berkley Law: Legal Scholarship Repository, November 2016).

150 Barth, Caprio and Levine, above n 55, 211.

151 Ibid 213.

152 Levine, above n 142, 10.

153 Australian Prudential Regulation Authority Act 1998 (Cth) s 11.

154 Ibid s 12.

155 Ibid s 59.

156 Australian Securities and Investments Commission Act 2001 (Cth) s 136.

157 See, eg, ASIC Inquiry, above n 3.

158 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, above n 108.

159 Joanna Mather, ‘Banking royal commission: APRA hasn’t taken court action over super law breaches’, Australian Financial Review (online), 17 August 2018 <https://www.afr.com/personal-finance/superannuation-and-smsfs/banking-royal-commission-apra-hasnt-taken-court-action-over-super-law-breaches-20180817-h143yv>; James Thomson, ‘Banking royal commission: Hayne shows APRA is no tough cop’, Australian Financial Review (online), 17 August 2018 <https://www.afr.com/personal-finance/superannuation-and-smsfs/banking-royal-commission-hayne-shows-apra-is-no-tough-cop-20180817-h144b8>; Chanticleer, ‘Productivity Commission right to question focus on “unquestionably strong”‘, Australian Financial Review (online), 3 August 2018 <https://www.afr.com/brand/chanticleer/productivity-commission-right-to-question-focus-on-unquestionably-strong-20180803-h13iwt>.

160 Alex Burke, ‘Australian system needs “substantial reassessment”: SEC veteran’, Financial Standard (online), 19 April 2016 <http://www.financialstandard.com.au/news/view/82123957>; see further: McConnell; Schmulow, both above n 132.

161 Australia’s ‘Twin Peaks’ regulatory model for the financial system comprises one regulator responsible for maintaining financial system stability, and another for ensuring good market conduct and consumer protection. The former is the Australian Prudential Regulation Authority (APRA), and the latter is the Australian Securities and Investments Commission (ASIC). For more on the role, mandate, functions and the underlying philosophy of the jurisdictions afforded to both peaks, see Taylor’s remarks circa 1995, in which he first set-forth his proposal for ‘Twin Peaks’. Michael W. Taylor, ‘Twin Peaks’: A regulatory structure for the new century (Centre for the Study of Financial Innovation, 1995). See also Michael W. Taylor, Peak Practice: How to reform the UK’s regulatory system (Centre for the Study of Financial Innovation, 1996) 2ff; Michael W. Taylor, ‘Twin Peaks’ Revisited…a second chance for regulatory reform (Centre for the Study of Financial Innovation, 2009) 4ff; Michael W. Taylor, ‘Welcome to Twin Peaks’ (2010) 21(1) Central Banking Journal; Heidi Mandanis Schooner and Michael W. Taylor, ‘United Kingdom and United States Reponses to the Regulatory Challenges of Modern Financial Markets’ (2003) 38(2) Texas International Law Journal 317, 336ff; A. D. Schmulow, ‘Twin Peaks: A Theoretical Analysis’ (Working Paper No. 064, Centre For International Finance and Regulation, 2015) 4ff; A. D. Schmulow, ‘Financial Regulatory Governance In South Africa: The Move Towards Twin Peaks’ (2017) 25(3) African Journal of International and Comparative Law 393, 395 ff.

162 Financial System Inquiry, above n 14, 239. Recommendation 27 states ‘Create a new Financial Regulator Assessment Board to advise Government annually on how financial regulators have implemented their mandates. Provide clearer guidance to regulators in Statements of Expectation and increase the use of performance indicators for regulator performance’.

163 Ibid. See also Barth, Caprio and Levine, above n 55, 217. A similar ambit of responsibility—the provision of annual reports and nothing more—was proposed for the ‘Sentinel’, precisely to prevent a blurring of the boundaries of accountability.

164 Financial System Inquiry, above n 14, 239.

165 Financial Systems Inquiry, above n 14, 235.

166 Ibid 237.

167 Ibid 241.

168 Ibid 242, at Fn 18.

169 Ibid 244.

170 Ibid 241.

171 Ibid 240.

172 Ibid 239.

173 Ibid 241.

174 Ibid 239. See also The Council of Financial Regulators, About the CFR <https://www.cfr.gov.au/about-cfr/index.html>. ‘The CFR operates as a high-level forum for cooperation and collaboration among its members. It is non-statutory and has no legal functions or powers separate from those of its individual member agencies’. Its membership comprises APRA, ASIC, the Reserve Bank of Australia (RBA) and the Treasury. Andrew Godwin, Timothy Howse and Ian Ramsay, ‘A jurisdictional comparison of the twin peaks model of financial regulation’ (2017) 18(2) Journal of Banking Regulation 103, 120. Quoting Evidence to Joint Committee on the Draft Financial Services Bill, House of Lords, London, 16 December 2011, 436 (Dr Edey, Assistant Governor of the Reserve Bank of Australia): The Assistant Governor of Australia’s RBA noted that the CFR ‘[has] never found any conflicting objectives or perspectives on policy’. Marion Williams, Twin Peaks: sufficient protection in a crisis? (4 March 2015) FINSIA <https://finsia.com/insights/news/news-article/2015/03/04/twin-peaks-sufficient-protection-in-a-crisis>: ‘The CFR coordinates activity across the Reserve Bank of Australia (RBA), APRA, ASIC and the Treasury, leading North to describe it as the “conductor of the regulatory orchestra.” He believes it gives rise to “significant potential for group think.”‘

175 Financial System Inquiry, above n 14, 239.

176 Ibid.

177 Ibid 240.

178 Ibid.

179 Levine, above n 142, 2.

180 Ibid.

181 Financial Systems Inquiry, above n 14, 243.

182 Ibid.

183 Ibid 245.

184 Ibid 243.

185 Ibid.

186 Ibid 243–4. For more on reciprocal oversight, see also Pagliari, ‘How Can We Mitigate Capture in Financial Regulation’, above n 77, 4.

187 Senate Economics References Committee, Parliament of Australia, Performance of The Australian Securities and Investments Commission (2014) 433, Recommendation 55.

188 Parliament of Australia, Competition Policy Review Draft Report (2014) 63 Draft Recommendation 47.

189 Commonwealth, The Failure of HIH Insurance, Parl Paper Nos 98–99 (2003) 209, particularly Recommendations 18 and 19.

190 Financial System Inquiry, above n 14, 244.

191 Ibid 239.

192 Australian Government, Improving Australia’s Financial System, Government response to the Financial System Inquiry (2015) 23. The regulators, ASIC and APRA, possibly fearing that a board of oversight would uncover the kinds of collusion between regulators and regulatees that has been uncovered through the Royal Commission, argued strenuously against the establishment of such a Board. See: Australian Prudential Regulation Authority, Submission to Financial System Inquiry, Parliament of Australia, Financial System Inquiry, 31 March 2014.

193 See Commonwealth, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, above n 89.

194 Financial Policy Committee (6 September 2018) Bank of England <https://www.bankofengland.co.uk/financial-stability>.

195 Financial Services Act 2012 (UK).

196 Jill Treanor, ‘Farewell to the FSA—and the bleak legacy of the light-touch regulator’, The Guardian (online), 24 March 2018 <http://www.theguardian.com/business/2013/mar/24/farewell-fsa-bleak-legacy-light-touch-regulator>.

197 Levine, above n 142, 2.

198 See, eg, Basel Committee on Banking Supervision, Bank for International Settlements, Core Principles for Effective Banking Supervision, (2012) 10, which states: ‘The supervisor…is accountable for the discharge of its duties and use of its resources’; International Organization of Securities Commissions, Objectives and Principles of Securities Regulation (2003) 4 which states: ‘The regulator should be operationally independent and accountable in the exercise of its functions and powers’. See also David T. Llewellyn, ‘Institutional Structure of Financial Regulation and Supervision: The Basic Issues’ (Paper presented at World Bank Seminar, Washington DC, 6–7 June 2006), 41 <http://web.worldbank.org/archive/website01049/WEB/IMAGES/F2FLEMMI.PDF> on the advantages of regulator accountability.

199 See, eg, Ben Butler, ‘D’Aloisio shelved CBA inquiry’, The Australian, 8 January 2018, 14.

200 Round 5 of Closing Submissions to Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Parliament of Australia, Melbourne, 24 August, 2018, 217 [814].

201 Details of the litany of scandals that have bedevilled the financial services industry are not within the scope of this article. For details, see Andrew Schmulow, ‘Retail Market Conduct Reforms in South Africa Under Twin Peaks’ (2018) 12(1) Law and Financial Markets Review 1, 163–73, Fn 103, 104.

202 Productivity Commission, Competition in the Australian Financial System Productivity Commission Inquiry Report, Report No 89 (2018) 38, Finding 3.2.

203 Mather and Eyers, above n 114.

204 Productivity Commission, above n 202, Finding 3.2.

205 James Frost, ‘APRA rejected CBA home loan data as inaccurate and incomplete’, Australian Financial Review (online), 2 April 2018 <http://www.afr.com/business/banking-and-finance/financial-services/apra-rejected-cba-home-loan-data-as-inaccurate-and-incomplete-20180402-h0y8ll>.

206 Pat McConnell, ‘Government backflip on ASIC could be too little too late’, The Conversation (online), 21 April 2016 <https://theconversation.com/government-backflip-on-asic-could-be-too-little-too-late-58210>.

207 Pagliari, ‘How Can We Mitigate Capture in Financial Regulation’, above n 77, 39.

208 Ibid.

209 Barth, Caprio and Levine, above n 55, 216–17.

210 Australian Prudential Regulation Authority, above n 192, 62.

211 Ibid. Barth, Caprio and Levine, above n 55, 217, refute this when they state: ‘Sentinel demands for information must trump the desires of regulatory agencies for secrecy…From regulatory failures contributing to oil spills and nuclear fuel leakages to those involving finance, the problem seems to be too much secrecy, not too much transparency’.

212 Australian Prudential Regulation Authority, above n 192, 63.

213 Productivity Commission, above n 202, 38.

214 See Commonwealth, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry above, n 89 and n 200.

215 For details on the ‘probability and impact rating system’ (PAIRS) and the ‘supervisory oversight and response system’ (SOARS) used by APRA, and attendant critique, see: Schmulow, ‘Financial Regulatory Reform In South Africa: The Move Towards Twin Peaks’, above n 161, 398–400.

216 See Charles Wyplosz, ‘Globalised Financial Markets and Financial Crises’ in Jan Joost Teunissen (ed), Regulatory and Supervisory Challenges in a New Era of Global Finance (Forum on Debt and Development, 1998) 72, 77–9.

217 So-called ‘Black Swan’ events, a theory developed by Nassim Taleb (Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (Random House, 2007)) to describe an event that comes as a surprise, is of significant impact, and is often inappropriately rationalised with the benefit of hindsight. For citing of the concept, see, eg, David Lewis, ‘Risk-Based Supervision: How Can We Do Better? An Australian Supervisory Perspective’ (Speech delivered at Toronto Centre Program on Supervisory Experiences in Implementing Global Banking Reforms, Toronto, 19 June 2013) <https://www.apra.gov.au/media-centre/speeches/risk-based-supervision-how-can-we-do-better-australian-supervisory-perspective>; Joint Committee on the Draft Financial Services Bill Report, House of Lords, London, 16 December 2011, 1026. But see Julia Black, ‘Learning from Regulatory Disasters’ (Working Paper No 24, London School of Economics Law, Society and Economy, 2014) 4, where Black points out, however that: ‘Nonetheless, the inquiries that often follow a disaster, even if it is a ‘black swan’ event, often reveal systemic problems within the regime which have hence far gone unnoticed by regulators, or unheeded by key policy actors’. It is precisely the kind of recursive review that would be conducted by a Financial Regulator Assessment Board (FRAB) that would be most suited to teasing-out these problems. See also Phillip Swagel, ‘The Financial Crisis: An Inside View’ (2009) 1 Brookings Papers on Economic Activity 1, 65.

218 Cristie Ford, ‘Macro- and Micro-Level Effects on Responsive Financial Regulation’ (2011) 44(3) University of British Columbia Law Review 589, 589.

219 Pat McConnell, ‘War on banking’s rotten culture must include regulators’, The Conversation (online), 4 June 2015 <http://theconversation.com/war-on-bankings-rotten-culture-must-include-regulators-42767>. See also Julie May, ‘Regulatory board to beef up watchdog accountability’, Financial Observer (online), 10 December 2014 <http://www.financialobserver.com.au/articles/regulatory-board-to-beef-up-watchdog-accountability>; Williams, Twin Peaks: sufficient protection in a crisis?, above n 174; Schmulow, ‘To clean up the financial system we need to watch the watchers’, above n 132; Ruth Williams, ‘Merit in oversight board for ASIC, but only if it’s got teeth’, Sydney Morning Herald (online), 27 January 2015 <http://www.smh.com.au/business/merit-in-oversight-board-for-asic-but-only-if-its-got-teeth-20150127-12z7zy.html>; Barth, Caprio and Levine, above n 55, 211; Pat McConnell, ‘Reckless endangerment: The failure of HBOS’ (2014) 7(2) Journal of Risk Management in Financial Institutions 202, 202.

220 Pat McConnell, War on banking’s rotten culture must include regulators, above n 219.

221 Llewellyn, above n 198, 41.

222 Geoffrey P. Miller and Gerald Rosenfeld, ‘Intellectual Hazard: How Conceptual Biases in Complex Organizations Contributed to the Crisis of 2008’ (2010) 33(2) Harvard Journal of Law and Public Policy 807, 838–9 [83]–[84].

223 See Bernstein, above n 18.

224 McCraw, above n 139, 44.

225 Ibid 44.

226 Erick F. Gerding, ‘Subprime Crisis and the Link between Consumer Financial Protection and Systemic Risk’ (2009) 4(2) Florida International University Law Review 435, 435.