It is notable that the Murray Inquiry’s Final Report did not recommend the regulation of shadow banking but has left that sector to be reviewed annually by the Council of Financial Regulators.
There is to be ongoing reliance on the Financial Claims Scheme and the depositor protection regime, with a hint that perhaps the $250,000 level of protection currently provided for each account with each institution, should be revisited.
The absence of a recommendation on shadow banking will be welcomed by the non-bank financial sector, as it seeks to increase competition and choice for consumers. However, that may not be the end of it.
The Final Report acknowledges that alignment with international developments will be important in relation to shadow banking.
The US has already begun to regulate some bank-type entities that do not take deposits (eg. GE Capital and AIG). Recent comments from European Central Bank Vice-President Vitor Constancio and a report to the G20 of the Financial Stability Board indicate that the EU and other countries may well follow the same path for shadow banking entities.