Twelve recommendations have been made to support the development of a more active corporate bond market in Australia.
The House of Representatives Standing Committee on Tax and Revenue today presented its report titled The Development of the Australian Corporate Bond Market: A Way Forward.
Corporate bonds are a type of debt security, issued by entities to finance their business operations.
The Committee’s recommendations aim to remove barriers to the issuing of corporate bonds as well as raise awareness about the benefits of corporate bonds, both for investors and issuers.
Specifically, the Committee’s recommendations include ensuring that investors have access to timely and useful information about corporate bonds, lowering the minimum investment parcel to $1,000 for corporate bonds, to improve accessibility to more investors, reviewing the licensing regime for credit rating agencies to minimise access barriers, and streamlining disclosure requirements for the issuing of simple corporate bonds.
The Committee’s recommendations also include proposed amendments to the relevant regulations to allow for the early redemption of simple corporate bonds, as well as a review of Chapter 2L of the Corporations Act 2001 (Cth) with the aim of increasing the availability of trustees for the retail bond market. Further, the Committee recommends a review of the regulatory reforms implemented in New Zealand’s corporate bond market to further develop and make more liquid Australia’s corporate bond market.
Committee Chair, Mr Jason Falinski MP, advocates for regulatory changes in this space.
“It is the hope of this Committee that the government will commence implementing recommendations as soon as possible as each recommendation will result in unleashing the considerable power of the corporate bond market in Australia.”
List of Recommendations
The Committee recommends that the Australian Government ensures that investors have access to timely and useful information about corporate bonds to make informed decisions, and increase the transparency around corporate bonds trading, including non-rated bonds, to improve access to a wider range of investors.
The Committee recommends that the Australian Government engages with universities and the financial advisory industry to educate and raise awareness about the benefits of corporate bonds, and retail corporate bonds in particular, both for investors and issuers.
The Committee recommends lowering the minimum investment parcel to $1,000 for corporate bonds to improve access to more investors and recommends that the Australia Government provides incentives for fixed income service providers to act as intermediaries for retail investors.
The Committee recommends that the Australian Government reviews the licensing regime for credit rating agencies with a view to minimise access barriers for small and medium enterprises, issuers and retail investors.
The Committee recommends that the Australian Government takes further steps to streamline and regularise disclosure requirements for the issuing of simple corporate bonds. This should ensure there is no duplication of requirements for listed entities that are already subject to continuous disclosure requirements.
The Committee recommends that the Australian Government amends relevant regulations to allow for the early redemption of simple corporate bonds to enable issuers to refinance bonds prior to their maturity date.
The Committee recommends that the Australian Securities and Investment Commission review its approach to financial ratios to maintain investor confidence in a standardised approach, while introducing more flexibility for bond issuers.
The Committee recommends that the Australian Government reviews Chapter 2L of the Corporations Act 2001 (Cth) and other regulatory obligations applicable to trustees with the aim of increasing the availability of trustees for the retail bond market.
The Committee recommends that the Australian Government review the regulatory reforms implemented in New Zealand’s corporate bond market to further develop, broaden, deepen and make more liquid Australia’s corporate bond market.
The Committee recommends that the Australian Government investigates the impact of increasing tax incentives to support the development of the corporate bond market to create alternative sources of funding and increase opportunities for investors to diversify their investment portfolios.
The Committee recommends that the Australian Government further engages with mature and sophisticated international capital markets to determine how Australia could adjust its taxation system to further enhance domestic and international investment through the growth of the corporate bond market.
The Committee recommends that the Australian Government investigate options to remove barriers inhibiting the investment of superannuation in the Australian corporate bond market.
A full copy of the Committee’s report can be found on the inquiry’s website.
