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The collapse of unlisted mortgage companies: a regulatory dilemma
journal contribution
posted on 2017-05-02, 00:00 authored by Monica KeneleyMonica Keneley, Graeme Wines, Ameeta JainAmeeta JainPurpose
Policy issues associated with the regulation of the unlisted debenture market have been highlighted in recent times with the collapse of a number of regionally based mortgage companies. The purpose of this paper is to analyse the decline and demise of the unlisted debenture market between 2007-2013 with particular reference to the effectiveness of the regulatory regime in stabilising the industry and protecting investors’ interests.
Design/methodology/approach
A database was constructed which reflected the total population of unlisted mortgage companies in the financial sector. A snapshot approach was used to assess the extent to which these companies complied with regulatory provisions.
Findings
Findings suggest the regulatory process allowed these companies to continue operating despite not complying with the relevant Australian Securities and Investment Commission (ASIC) benchmarks. In the light of the current inquiry into the financial system, the research suggests that a re-evaluation of the regulatory approach is timely.
Research limitations/implications
This research is restricted to a study of one category of debenture issuers ( issuers of mortgage finance). It is based on reports required by regulatory authorities. It does not provide an analysis of the motivations of investors in these companies.
Practical implications
This research has implications for the implementation of regulatory change in respect to oversight of shadow banking activities. It suggested that a passive approach to regulation is not sufficient to ensure that the interests of investors are fully protected.
Originality/value
No prior research has systematically examined the unlisted mortgage and analysed the borrowing and lending activities of companies that have failed and those that have survived.
Policy issues associated with the regulation of the unlisted debenture market have been highlighted in recent times with the collapse of a number of regionally based mortgage companies. The purpose of this paper is to analyse the decline and demise of the unlisted debenture market between 2007-2013 with particular reference to the effectiveness of the regulatory regime in stabilising the industry and protecting investors’ interests.
Design/methodology/approach
A database was constructed which reflected the total population of unlisted mortgage companies in the financial sector. A snapshot approach was used to assess the extent to which these companies complied with regulatory provisions.
Findings
Findings suggest the regulatory process allowed these companies to continue operating despite not complying with the relevant Australian Securities and Investment Commission (ASIC) benchmarks. In the light of the current inquiry into the financial system, the research suggests that a re-evaluation of the regulatory approach is timely.
Research limitations/implications
This research is restricted to a study of one category of debenture issuers ( issuers of mortgage finance). It is based on reports required by regulatory authorities. It does not provide an analysis of the motivations of investors in these companies.
Practical implications
This research has implications for the implementation of regulatory change in respect to oversight of shadow banking activities. It suggested that a passive approach to regulation is not sufficient to ensure that the interests of investors are fully protected.
Originality/value
No prior research has systematically examined the unlisted mortgage and analysed the borrowing and lending activities of companies that have failed and those that have survived.
History
Journal
Accounting research journalVolume
30Issue
1Pagination
1 - 27Publisher
Emerald Group PublishingLocation
Bingley, Eng.Publisher DOI
ISSN
1030-9616Language
engPublication classification
C1 Refereed article in a scholarly journal; C Journal articleCopyright notice
2017, Emerald Group PublishingUsage metrics
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