The governments in the western world are intervening in a free market environment in a way that is unprecedented. President Bush has discussed changing accounting standards to allow a softer version of the current crisis and in Australia Kevin Rudd has declared that the Australia government will guarantee deposits of Australian banks. Issues arise in this scenario. Take for instance a bank with an AAA rating prior to this announcement. They have made decisions based on security and compliance measures to minimise their risk realising that there is a cost in implementing these measures but that the market will value the reduced risk as evidenced by their AAA rating. Conversely smaller non bank financial institutions may not have the financial strength to fulfil the requirements of an AAA rating or conversely they may decide that their strategy is to pay a higher interest rate to attract depositors who would be aware of the higher risk. Now with the government guaranteeing deposits there is no reason to get paid lower rates so we should expect to see a movement towards riskier financial institutions which were the very institution that instigated the collapse in the first place. It is not as simple as AAA banks increasing their interest rates because they have incurred costs and implemented policies to gain their rating. Certainly there is the temptation to loosen the controls to allow greater risk to stay competitive.
The western world has a balance between a free market economy and a regulated economy. There is a degree of regulation designed to require powerful organisations to act within rules and frameworks in order to protect the weak and marginalised. The penalty of risky behaviour is that it could end in bankruptcy. Now the government is stepping in to buoy a system creating a new equilibrium which allows organisations to behave in a more risky fashion. The Australian government has moved to support the banking environment as finance underpins growth and economic stability.
The fundamentals of this argument are contained in the Diploma of Financial Services (Financial Planning) often refereed to as Diploma of Financial Planning which is often RG146/PS146 compliant. To be PS146/RG146 compliant Financial Planners (Financial Advisers) are required to undertake a course to make them “ASIC Compliant” that is undertake a course which is listed on the ASIC training register. RG146 / PS146 training or RG146 / PS146 courses are undertaken by para-planners and financial planners. These courses must be undertaken to give personal advice or general advice in such areas as Superannuation, Managed Investments, Derivatives, Securities, Financial Planning and insurance.
RG146 or Regulatory Guide 146 and PS146 Policy Statement 146 have been increasingly important in the financial services industry. To give some perspective on the changes that have occurred in the industry Dr Antony Young remembers the introduction of the Policy Statement 146 and he stated that “there was a lot of uncertainty at the time about the impact the policy statement was going to have on the industry”. He noted that the style and format of Policy Statement 146 did not help. “There was a lot of repetition in Policy Statement 146 and much of the terms and phrasing was not clear”.