Banking reform in Australia, Covered Bonds & Basel III impacts

Introduction

Over the last two weeks, long awaited Australian and international regulatory reforms have been announced by the Australian Government, the Basel Committee on Banking Supervision, the Reserve Bank of Australia and the Australian Prudential Regulation Authority which will have significant impacts on the financial services industry in Australia. In particular, the Australian Government's decision to allow Australian banks, building societies and credit unions to issue covered bonds promises finally to place Australian authorised deposit-taking institutions ("ADIs") on a level playing field with their international competitors which are already permitted to issue covered bonds. However, questions remain as to whether that playing field will be level between all ADIs and how non-ADI financial institutions will be impacted by the Government's decision. In the days following these announcements, some of the dust has started to settle, allowing further analysis