12-262MR ASIC taskforce to review Banksia and regulation of unlisted debentures
Wednesday 31 October 2012
ASIC Chairman, Greg Medcraft has announced an internal taskforce to look at the failure of Victorian debenture issuer Banksia Securities Limited and regulation of the wider Australian unlisted debenture sector.
The taskforce will comprise business units from across ASIC and will be led out of Melbourne by Commissioner John Price.
The taskforce will make recommendations to Treasury.
‘The failure of Banksia, an unlisted debenture company that has operated a mortgage financing business across a large part of regional Victoria, will affect the lives of many everyday Australians. ASIC wants to take a closer look as it is another area of retail-funded shadow banking.’, ASIC Chairman Greg Medcraft said.
‘At the moment there are laws around disclosure and, to a limited extent, the conduct of debenture issuers. But we need to lift the regulatory intensity to make sure that investors are confident and informed.’
‘The taskforce will review the extensive work we’ve done to date around the regulation of the unlisted debenture sector. The taskforce’s work may involve making recommendations to Treasury about law reform given we have pushed the existing conduct and disclosure regime to its limit.’
‘We will also work closely with Banksia receivers and managers McGrath Nicol to try and get the best result for Banksia investors and retail clients who Banksia provided credit to. Importantly, we’ll also continue to remind debenture trustees of their obligations as gatekeepers to protect investors and monitor debenture investments - particularly bad loans and liquidity problems.’
ASIC’s recent activity in this sector more broadly has included undertaking general market reviews into the Australia unlisted debenture market and ASIC has conducted risk based surveillances on a small number of debenture issuers.
ASIC’s historical work in the debenture sector reflects the fact that a disclosure regime is in place for debentures, coupled with the requirement that a trustee is in place to monitor the issuer and seek to protect the interests of debenture holders.
Unlisted debenture issuers, like Banksia, ask investors to loan them money for a fixed term (or sometimes at call) and at a specified rate of interest. There is a trustee that is appointed to protect the interests of investors. Debenture issuers unlike banks, building societies and credit unions etc are not generally regulated by APRA nor are there any prudential standards that apply. ASIC is not a prudential regulator but will monitor disclosures made by debenture issuers.