Philosophical Foundations of the Wallis Report

The Wallis Report, adopted by the Government in September of this year, contained a wide-ranging set of reforms that are likely to alter significantly the style and structure of financial regulation in Australia. This survey offers some reflections on the Wallis Report, its key recommendations and the thinking underlying them. The Committee saw market failure as the primary rationale for regulation. Markets fail to produce efficient, competitive outcomes for one or more of the following reasons: anti-competitive behaviour; market misconduct; information asymmetry; and systemic instability. The Committee's recommended reforms were designed to create a regulatory structure that matched the four motives for regulation. This will create a regulatory structure based on regulatory functions rather than institutions. The new structure should be more efficient, less duplicative and better able to cope with the regulatory pressures that are likely to emerge in coming years from on-going technological innovation.