Submissions - 2023

Date Title & Summary Topic Area Sent to

Treasury Laws Amendment (Making Multinationals Pay Their Fair Share-Integrity and Transparency) Bill 2023 – Technical Amendments

AFMA remains concerned that the risk of unintended consequences from the proposed legislation remains high. AFMA strongly supported the proposals to exempt ADIs and securitisation vehicles from the Debt Deduction Creation Rules. AFMA reiterated previously expressed concerns that the changes to the definition of "debt deduction" could adversely impact banks and other financial entities.   

Taxation Senate Standing Committees on Economics

Chapter 21 of the AML/CTF Rules – Proposed Amendments

AFMA supports the intent of the proposed amendments.  However, AFMA supports more principles-based drafting of the exemption to reduce the instances where an amendment to the Rules needs to be made whenever a new exchange commences operations in Australia.  

Regulation AUSTRAC

Sustainable Finance Strategy Consultation Paper

AFMA supports the ambitions and proposals of the sustainable finance strategy but affirms that outstanding data and assurance issues must be addressed. AFMA also believes that the ICMA Principles are already the Australian DCM standard and that government should consider this in their proposals to implement a labelling system. 

Regulation Treasury

Regulating Digital Asset Platforms

AFMA is broadly supportive of the proposed framework. The focus on digital custody and tokenised non-financial products and new activities are supported.  AFMA also highlighted that there are risks that if a balance is not maintained between the regulation of traditional finance and digital asset regulation, there is the potential that business could be driven to use blockchain technology not for inherent technical advantages but to take advantage of regulatory differences.

Regulation Treasury

NSW Renewable Fuel Scheme- discussion paper on scheme expansion

AFMA supported the proposed expansion of the scheme to other renewable fuels and aligning it with the Commonwealth  schemes. AFMA also recommended that fuel specific incentives should be avoided as markets naturally determine costs and support the expansion of the most commercially viable fuel. AFMA highlighted that costs should be borne by those who benefit  and that the implementation of the RFS should be delayed to allow more renewable fuels to be included. 

Regulation NSW Treasury

Project Energy Connect – Directions Paper

AFMA believes that the allocation of inter-regional settlement residues should preserve the value of units as hedging instruments and that there should not be any netting of negative and positive residues. AFMA recommended that negative residues should continue to be recovered from Transmission Network Service Providers in the importing region. 

Regulation AEMC

Public Consultation on the Government's response to the statutory review of the Personal Property Securities Act 2009

AFMA was broadly supportive of the amendments consistent with our previous comments to prior consultations since 2014. AFMA supports a transition model from the existing regime as opposed to a grandfathering model but  raised its concerns regarding the definition of 'account' and the consequences this could have. AFMA also noted that there are technical difficulties with the legislation with respect to control over intermediated securities where the same party is the custodian/ secured party, which are long recognised difficulties. 

Regulation Attorney-General's Department

Discussion paper - Enhancing bank resilience: Additional Tier 1 Capital in Australia

AFMA is supportive of measurers to enhance banks and system resilience. AFMA recommended that APRA focus on two overarching themes: (i) maintaining functioning financial markets;  and (ii) balancing costs, benefits, knock-on effects and  risks in designing a new regime. 

Regulation APRA

Request for comment – Banks: Proposed Methodology Update

AFMA supported Moody's proposal but recommended that Moody's adopt a more nuanced approach to reflect that the Australian resolution framework is still being developed, the diversity of ADIs in Australia and the fact that APRA is likely to adopt different approaches across this diverse population of ADIs. 

Regulation Moody's Investor Services

Future Gas Strategy – Consultation Paper

AFMA supported the intent to develop an overarching strategy to consider the role of gas in the transition and expressed the view that gas markets will contribute to the transition. AFMA explained that lack of consistent policy about the role of gas is blunting market signals and complicating investment decisions. 

Regulation DISR

Review of the Operation of the RRO – Draft Report

AFMA's submission supported the AEMC's draft recommendations but maintains the belief that the RRO is a fundamentally flawed mechanism and supports a further review to consider the ongoing need for it.

Regulation AEMC

Treasury Laws Amendment (Making Multinationals Pay Their Fair Share-Integrity and Transparency) Bill 2023 – Technical Amendments

AFMA's submission welcomed further consultation on the Government's Bill and specifically recommended that the proposed exemptions from the Debt Deduction Creation Rules for ADIs and securitisation vehicles be extended to include entities that are classified as “financial entities”, that the expanded definition of “debt deduction” to include costs that are considered to be economically equivalent to interest, such as payments on interest rate derivatives, applies only to general entities for thin capitalisation purposes and that the Debt Deduction Creation Rules in proposed Subdivision 820-EAA apply only to arrangements entered into in income years commencing on 1 July 2024 or later.

Taxation Treasury

Market Settings Draft Rule

AFMA highlighted its support for the proposed changes to the market settings and that we continue to consider that APC should be indexed to ensure it remains commercially relevant. 

Regulation AEMC

Guarantee of Origin Scheme Design paper and Renewable Electricity Approach paper

AFMA supports introducing a credible national guarantee of origin scheme and believes that creating a register with quality information and appropriate functionality will be key to the schemes’ success. 

Regulation DCCEEW

Draft Prudential Practice Guide CPG 230 Operational Risk Management

AFMA remains supportive of APRA’s initiatives to modernise the prudential framework. To reduce negative impacts and better align the policy reforms to their aims, AFMA strongly recommended to allow flexibility in implementation timelines, further refine the scope of the reforms and enhance proportionality and substituted compliance.  

Regulation APRA

Victoria’s Renewable Gas Consultation Paper

AFMA's submission supported the inclusion of all renewable gases and that the scheme should focus on "hard to decarbonise" sectors. AFMA strongly supports a market based approach and believes that the scheme should be designed as a tradeable certificate scheme.

Regulation Victorian State Government Department of Energy, Environment and Climate Action

Review of the Regulatory framework for managed investment schemes

AFMA's position is that the distinction between retail and wholesale clients has much broader implications than just for managed investment schemes. We agree with the broad proposition that the wholesale client definition needs to be reviewed holistically. 

Regulation Treasury

ACCU Review – Discussion Paper

AFMA supports increasing transparency in the ACCU market and that the rebuild of ANREU should facilitate disclosure of relevant information to the market. AFMA also believes that Government purchases and sales of ACCUs should be conducted in a way that minimises disruption to the market.

Regulation DCCEEW

Licensing exemptions for foreign financial services providers (FFSPs)

AFMA's submission supported the introduction of the three proposed exemptions and expressed concern at the proposed conditions attached to the exemptions.  Such exemptions need to apply to ensure providers can continue to provide their services in an effective way for the benefit of their Australian clients.

Regulation Treasury

Capacity Investment Scheme – Consultation Paper

AFMA support incentivising new dispatchable capacity to participate in the market and that the CIS should be designed to minimise costs to energy users and taxpayers. AFMA expressed the view that government should provide clarity about the scale of the CIS and about the future of the RRO and that a separate mechanism is likely to be required to support the continued operation of non-renewable generation at the levels currently anticipated by AEMO. 

Regulation DCCEEW

Gas Market Code Regulations Inquiry

AFMA highlighted that the gas market has been subject to a high volume of regulatory change in a short time period, motivated by unprecedented volatility which the market has now largely resolved. AFMA urged policy makers to review the impact of the reforms on the gas market code and consider if there is a solid case for ongoing market intervention. 

Regulation Senate Committee

National Hydrogen Strategy Review

AFMA highlighted that sources of long-term demand for Hydrogen will be critical in establishing a viable market and that it will likely be of most value to sectors with hard to reduce carbon emissions, such as industrial or transportation use. AFMA urged that consideration should be given to the extent to which co-mingling hydrogen with natural gas contributes to least cost emissions reductions.

Regulation DCCEEW

Regulator rules, Transitional rules and ADI key functions

AFMA sought reassurance that firms will retain the option not to assign the key function to an accountable person, requested confirmation in the guidance that FAR will operate in a similar way to exclude SREs of foreign ADIs, and that there is an overlap with the regime  particularly for non-foreign ADIs. AFMA also raised member concerns on reporting lines, privacy, overlap with existing programs and requested detailed guidance  specific to foreign ADIs. 

Regulation APRA & ASIC

Public Comment on IOSCO’s Consultation Report Policy Recommendations for Crypto and Digital Asset Markets

AFMA strongly supported the strategic direction taken in the report and supported the principles-based and outcomes-focused approach. AFMA provided response to the specific questions asked by IOSCO in the consultation paper and largely agreed with approaches, definitions and requirements proposed. 

Regulation IOSCO

Draft Financial System and Regulator Metrics Framework

AFMA's submission expressed caution as to the direction of the current metrics project given the effective disbandment of the FRAA panel.  The submission also explained that selection of a metric for a regulator creates strong incentives that can readily be at odds with the interests of the industry and the economy. AFMA suggested that the metrics work should be supported by and align with the strategic approach of the incoming Panel members and the metrics project should be held in abeyance. 

Regulation Treasury

Safe and responsible AI in Australia

AFMA explained that the risks of early regulation in such a fast-moving area are skewed much more towards creating impediments to industry and innovation rather than fostering them. AFMA's submission stated that some of the proposals appear unnecessarily burdensome. In terms of wholesale and financial markets more widely, AFMA suggests a more cautious approach to regulation that moves slowly, leverages international regulatory outcomes, and is careful to preserve the potential efficiency gains that AI is enabling.

Regulation Department of Industry, Science and Resources

ALRC Report 140 Report on Financial Services Legislation

AFMA agreed with the ALRC's  analysis in the report and that legislative reform is required. AFMA is however concerned about the appropriateness of grouping of provisions in the FSL Schedule and their impact on financial market regulation and the guiding concept and purpose of Chapter 7 in relation to market integrity. AFMA has recommended that further policy work is required across some proposals. 

Regulation ALRC

Climate-related financial disclosure: Second consultation

AFMA remains concerned that that some of the proposals are unrealistic and unachievable within the proposed timeframes and will place undue liability risk, reputational damage and unattainable requirements on reporting entities. AFMA has recommended to accept group level disclosure for foreign financial institutions, that a five year transition should apply and that Scope 3 reporting for financial institutions should remain voluntary during the transition period.

Regulation Treasury

Treasury Laws Amendment (Making Multinationals Pay Their Fair Share-Integrity and Transparency) Bill 2023

AFMA highlighted the potential unintended consequences that would affect members through the proposed amendments to the thin capitalisation provisions, namely the debt creation rules. The rules would create a number of problems for financial market participants and create practical uncertainty. AFMA recommended that it be removed and also provided caveats to ease such issues, should the provision remain.

Taxation Economics Legislation Committee

Gas Reliability and Supply Adequacy Framework

AFMA sought clarity about how AMEO will perform its functions which will provide much needed certainty to the gas market and that policy makers should provide guidance about how recent gas market policy initiatives will work together. AFMA's submission made clear that we did not support imposing contracting obligations in the gas market. 

Regulation Department of Climate Change, Energy, the Environment and Water

Setting, tracking and achieving Australia’s emissions reduction targets

AFMA expressed that markets require clear market signals and that an emissions policy based on clear long-term targets is vital for markets to perform their intended function. AFMA highlighted that confidence in the quality of ACCUs is critical to ensuring they contribute to emissions reductions and for the success of the market. AFMA believes that the regulatory framework should accommodate enhanced retail participation in the carbon market. 

Regulation Climate Change Authority

Unfair Contracts Terms Small Business Extension Unintended Impact on Institution Financial Market Contracts

AFMA raised concerns about the amendments proposed to the UTC provisions. Specifically AFMA remains concerned about the small business definition and the upfront price concept. AFMA highlighted that the grandfathering provisions can be difficult to apply to master agreements and that the geographic application has the risk that the entire transaction, documentation, domicile of the parties and location of the persons involved could be outside Australia. AFMA is concerned that the use of template industry contracts is not being specifically catered for in the regime.

Regulation Treasury

Modernising Australia’s Anti-Money Laundering and Counter-Terrorism Financing Regime

AFMA's submission focused on priority areas for reform. AFMA felt that the Simplification Project should focus on reducing the level of prescription in the AML/CTF Act and Rules and restore the primacy of the risk-based approach; that the tipping off prohibition is ripe for reform to allow for the disruption of serious financial crime through the effective sharing of information; and that the re-write of Part 5 of the Act should be a priority of the Simplification Project and should extend to simplification of the IFTI reporting framework. AFMA also sought clarification on the definition of 'bearer negotiable instrument' and was supportive of the proposal to bring Tranche Two entities within the scope of the AML/CTF Act.

Regulation Attorney-General's Department

Market Settings Rule Change

AFMA expressed its support for the proposed changes to the market settings and argued that the APC should be indexed to ensure it remains commercially relevant.

Regulation Australian Energy Market Commission

Failed Retailer Review – Directions Paper

AFMA supported the AEMC's decisions not to intervene in derivatives contracts and to allow ROLRs to be able to recover the full cost of acting as a ROLR. AFMA asserted that gas and electricity cost recovery frameworks should be as similar as possible. To the extent possible, AFMA also believes that failed retailers should be liable for the cost of an ROLR event. 

Regulation Australian Energy Market Commission

Nature Repair Market Bill 2023 – Committee Inquiry

AFMA was supportive of a market led nature recovery.  However, AFMA expressed concern regarding surrounding the design and market mechanisms. AFMA highlighted the need to clarify the buyer, determine how the product will generate returns and to issue standard sized fungible certificates to facilitate trading. AFMA additionally called out the risk for potential double counting of ACCUs with biodiversity co-benefits alongside existing issues with the state schemes. 

Regulation Senate Committee

Transmission Access Reform – Consultation Paper

AFMA expressed its support for the implementation of the enhanced information reforms. We did however express that the CRM should be developed as a genuinely optionional mechanism.  AFMA also believes that the ESB should work with financial market participants to ensure their cost benefit analysis appropriately reflects changes to the participants' hedging costs. 

Regulation Energy Security Board

Digital Assets (Market Regulation) Bill 2023

AFMA restated its long held position in relation to the regulation of digital assets, that as digital assets present similar or higher risks to other financial products, they should be subject to similar regulation. AFMA’s preferred mechanism is for digital assets to be explicitly included in the definition of “financial product,” such that the existing licensing framework applies.

Regulation Senate Standing Committee on Economics

Gas Market Code Exposure Draft

AFMA highlighted to Government that investment is required to ensure secure gas supply t and that certainty is critical to facilitate investment. The Code’s exemption framework did not however support investment in new assets and highlighted that failure to invest could lead to supply shortages.  AFMA subsequently made a number of recommendations to address our concerns. 

Regulation DCCEEW

Australian Cyber Security Strategy

AFMA encouraged the recognition that an accommodative, supportive stance is  most likely to keep channels of communication and information flow open, and is most likely to support an uplift in standards.  AFMA highlighted that a punitive regime risks a legalistic approach to sharing risks and the benefit of experience, which would result in a far from optimal outcome.

Regulation Home Affairs

Multinational Tax Transparency – Public Country-by-Country Reporting

AFMA expressed considerable concern regarding the proposed public disclosure of country-by-country reporting information and recommended that the legislation include a de minimis exemption on disclosure obligations for significant global entities with a minimal Australian presence;  the disclosure requirement be aligned to GRI 207 ds; an exemption for significant global entities that are headquartered in jurisdictions that have separate public CbC disclosure requirements; the Government not to proceed with the requirement to disclose effective tax rate and  that obligations apply to income years commencing on or after 1 July 2023.

Taxation Treasury

Wholesale Market Monitoring and Reporting Reforms

AFMA was concerned that our recommendations to streamline the proposal for the benefit of both participants and the AER were not fully reflected in the exposure draft. Alongside the AEC, AFMA highlighted that the current proposal is broad, fails to fully appreciate the scale of the proposed reporting obligation and will have significant cost implications for both participants and the AER.  

Regulation Energy Ministers

Review of the Operation of the RRO

AFMA highlighted our concerns about the appropriateness of attempting to use
a mechanism based on financial market contracts to enhance physical system reliability and consider
that policy makers should replace the RRO with a more appropriate mechanism to ensure system
reliability. AFMA considers that a well‐designed mechanism aimed directly at dispatchable capacity
in the physical market will be simpler than the RRO and achieve policy makers’ reliability objectives
without having unintended consequences in the financial market.

Regulation Australian Energy Market Commission

Review of the Form of the Reliability Standard and APC

AFMA explained that we did not consider that there is an issue with the current form of APC as
a fixed number, but we consider that it should be indexed, to CPI in the same way as the Market Price Cap and Cumulative Price Index, to ensure it remains commercially relevant. 

Regulation Reliability Panel

Superannuation Industry (Supervision) Amendment (Your Future, Your Super – Addressing Underperformance in Superannuation) Regulations 2023 (Draft Regulations)

Whilst generally supportive, AFMA was  concerned to see the inclusion of two disaggregated indices in the Performance Test diluting the impact of implementing the Master index for inflation linked bonds. AFMA recommended that Treasury adopt benchmark indices that  include inflation linked bonds and SSA securities to measure the performance of fixed income portfolios.

Regulation Treasury

Competition in Clearing and Settlement Draft Bill

Overarchingly, AFMA is supportive of the objectives of the Bill. AFMA did however highlight the lack of merits review that the ACCC will be subject to which is unlike other equivalent arbitration regimes. Given the acceptance of what the Bill will enable, AFMA's submission focuses on how the regulators will use their new powers. 

Regulation Treasury

Multinational Tax Integrity- Strengthening Australia's Interest Limitation (Thin Capitalisation) Rules

AFMA made a number of recommendations which included: not proceeding with the proposed amendments to Section 25-90 and Section 230-15; clearly articulation of the integrity concerns used to justify proposed amendment to the definition of 'financial entity'; ensuring that entities affected by the scope of Section 820-39 are not subject to the interest limitation rules; seeking confirmation on restructures to funding arrangements; that any resulting cost breaks are deductible; and any amendments  apply to income years starting on or after 1 July 2024. 

Taxation Treasury

Privacy Act Review Report Response

AFMA outlined that our previous concerns from the original proposals still stood, urging reconsideration of these points. Whilst supportive of the proposals, AFMA also asserted that certain aspects required greater consultation, alteration, clarity and elaboration. 

Regulation AGD

CP 366 Proposed amendments to the ASIC Derivative Transaction Rules (Clearing) 2015: Second consultation & Draft DTR Instrument

AFMA and ISDA had only one substantive comment which was that whilst the proposed three-month implementation period was welcomed, a six month period was requested to allow clearing participants sufficient time to prepare and make system and operational changes in an orderly fashion. Implementation costs were also cited. 

Regulation ASIC

Rationalisation of ending ASIC Instrument Measures

AFMA highlighted that given the passage of time since 2001 financial services law reform, the transitional arrangements and modifications that were required at the time to make the law work in practice has long since passed. AFMA's submission stated that matters which require permanent modification of the law should be easily discernible seen on the face of the law itself. 

Regulation Treasury

Token Mapping

AFMA's submission highlighted our support for better integration of the token-based systems into the financial regulatory framework to reduce investor and system stability risks. We support Treasury looking through the technological implementations  to see what the outcomes, risks, and parties to these arrangements are. AFMA's submission accepted that in some circumstances this may require some adjustments to the regulatory drafting to ensure products with similar risks and outcomes are captured.

Regulation Treasury

Review of Australia’s Autonomous Sanctions Framework

AFMA supported the streamlining of the legal framework underpinning the Autonomous Sanctions regime, highlighting the current framework's complexity and issue.  AFMA 's submission supported the introduction of a humanitarian exemption and the Review Mechanism for Designations and Declarations.

Regulation ATO

Prudential Standard APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book (IRRBB)

AFMA supports the release of a revised version of APS 117 and the exclusion of non-significant financial institutions from the qualitative requirements under the standard. Our submission supported the approach from APRA for its exclusion of foreign ADI branches from the requirements of the standard, this being an efficient and proportionate response. 

Regulation APRA

Safeguard Mechanism – Position Paper

AFMA strongly supports the development of the Safeguard Mechanism as a market led approach to meeting Australia’s net zero commitments. AFMA highlighted that the design of SMCs is likely to support the development of a functional market and that the approach to setting and reviewing benchmarks provides valuable clarity to the market.  Our submission also advocated that the period for trading SMCs for the current surrender year should be extended to 6 months. 

Regulation DCCEEW

Australian Domestic Gas Security Mechanism Guidelines

AFMA highlighted the concern that, in combination, these reforms could distort commercial decision making in the east coast gas market resulting in inefficient use of gas and inadequate supply, to the long term detriment of Australian consumers. AFMA is concerned that the proposed Guidelines will obscure market signals in the domestic gas market and therefore limit the ability of the market to match supply and demand.  Rather than securing domestic supply, the proposed Guidelines may undermine the ability of the market to satisfy domestic demand and will result in an ongoing need for government intervention to ensure customers are able to access gas. AFMA also highlighted that policy makers need to consider this policy in the context of the totality of gas market reforms and recommend that their combined impact on the market should be reviewed.

Regulation Department of Industry, Science and Resources

Climate-related financial disclosure Consultation Paper

AFMA's submission offered our support for the Government's intention to provide greater transparency in relation to climate related disclosure. AFMA agrees with the objective of standardised, internationally-aligned reporting requirements for businesses to make disclosures regarding governance, strategy, risk management, targets and metrics – including greenhouse gases. Overall mandatory business disclosure standards should, as far as possible, be aligned with international reporting practices, to minimise compliance costs for Australian businesses that operate internationally, safeguard Australia’s financial centre attractiveness and to ensure Australia’s regime is viewed with credibility by international markets. AFMA agrees with the principle that Australian standards should build on the existing financial reporting system and be both scalable and flexible to accommodate future developments in the global baseline for climate and sustainability reporting, to minimise the expected compliance costs and potential for unintended consequences.

Regulation Treasury

Digital Platforms: Government consultation on ACCC’s regulatory reform recommendations

AFMA provided in-principle support for efforts to create an ecosystem which is more resistant to the promotion of scams on digital platforms.

Regulation Treasury

A Strategic Plan for the Payments System

AFMA provided support for the important function the payments system plays for wholesale markets and banking participants. This includes support for structures that recognise and support the need for ongoing private investment in the system.

Regulation Treasury

AFMA 2023/24 Pre-Budget Submission

AFMA Pre- Budget Submission encourages the Government to continue to provide transparency regarding its policy intent and priorities. We note that sending stable, well founded and consistent market signals is important in driving investment and growth on a sustainable basis. Our submission includes a number of tangible recommendations that reflect our strategic priorities around issues such as regulatory efficiency, the development of tradeable instruments to support the financing of the economy, supporting a smooth transition towards net-zero and enhancing Australia’s attractiveness as a financial centre.  

Other Treasury

CP 365 Remaking ASIC class orders on takeovers, compulsory acquisitions and relevant interests

AFMA's submission expressed our general support for ASIC’s proposals with the exception to the amendment to the money-lending exception;  proposing that as a minimum, ASIC include a carve out for AFSL holders, given their rigid pre-existing regulatory obligations. AFMA also recommended an exception to avoid the natural issues that arise under S 12(2)(c) for financiers under a syndicated arrangement becoming associates, with respect to the sell down of the shares on enforcement as a result of any coordination agreement/arrangements. 

Regulation ASIC

Renewable Fuel Scheme – Discussion Paper

AFMA's submission supported using the Energy Savings Scheme’s regulatory framework to support the RFS. The submission also expressed the need for ensuring that there are consistent benchmarks for green hydrogen, alignment with the GO scheme, that compliance be simplified and that details of the financial impact of the RFS, including any shortfall arrangements, be communicated as early as possible. AFMA also proposed that the scheme be technology neutral so that other renewable fuels, such as biomethane, biodiesel and ethanol, can be eligible for the scheme.

Regulation NSW Treasury

Further improvements to Corporations and Financial Services Law

AFMA's submission expresses our full support for the Government's work to address the unnecessary complexity in the corporations and financial services law. 

Regulation Treasury