On Saturday, banks and banks across Australia will celebrate the anniversary of the GFC.
But a new report warns that the GFS could do more to stop foreclosures and save families and businesses.
The Australian Bureau of Statistics (ABS) released a report last week, warning that the new Australian Financial Stability Agency (AFSA) could be better at detecting and preventing bank failures than it is at providing solutions to consumers and businesses facing losses.
This is because the new agency does not provide a comprehensive framework for dealing with bank failures, such as providing a range of solutions, such the national bankruptcy code.
Instead, it has focused on providing guidance to banks, rather than on making a public financial statement, as the banks were required to do.
But experts say that’s not a bad thing.
“If you have a bank that is under a lot of stress, you should be very cautious,” says Dr Sarah Bowers, a researcher at the Australian Centre for Financial Analysis (ACFA).
“I think that if you can see that the banks are doing really well and the industry is doing really poorly, and you can’t find out why, you will be less inclined to do a big loan to the bank.”
Bowers says that banks can benefit from a new agency.
“The banks can also benefit from the AFSA because the banks, being the dominant financial institutions in Australia, have the power to shape the rules around banking in their country,” she says.
“So you would be able to have a very robust discussion around banking and whether that is what the regulators are looking for or not.”
It’s the latest push by governments to provide more clarity about what constitutes a bank failure.
In June this year, the Reserve Bank of Australia announced it would be opening a bank-specific financial advisory centre (BIC) to help banks identify, investigate and respond to potential financial risks.
This will give banks a clearer understanding of their financial condition and help them avoid potential mistakes that could lead to losses for consumers.
And earlier this year the Federal Government announced that it would work with the Australian Bankers Association (ABA) to provide a “broader definition” of a bank collapse.
But these measures aren’t enough.
The report from the ABS says that a lot more needs to be done to help businesses and consumers facing financial difficulties.
“In order to be successful, financial institutions need to be able, in their own minds, to have some level of certainty that they’re safe,” says Bowers.
“And there are several steps that need to come together, including: the creation of a clearer and more comprehensive framework, a framework that is tailored to the specific circumstances of the bank; and the creation and regulation of standards that are specific to banks.”
This is exactly what Australia needs to do, says Professor Tim O’Brien from the Australian National University.
“It’s the banks themselves that have to get the guidance, the advice that they need, so that they are not just making decisions on how to avoid potential losses,” he says.
For banks, the GFA is a step in the right direction.
It is also a reminder that while we may be seeing a “new normal” of financial markets, there are still a lot we can do to help people and businesses recover.
Watch the ABC’s Inside Banking documentary for more on this story.
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This story was produced by ABC News Online’s In The Family.
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