The Council of Financial Regulators and the ACCC say they are exploring a regulatory framework to support the long-term sustainability of the cash distribution system, “to ensure that it operates in the public interest.”
This regulatory framework is aimed squarely at enabling financial regulators to seize control of Armaguard, the dominant cash-in-transit provider in Australia.
If needed, which is an open question.
For nearly two years now there have been acute questions over the financial viability and sustainability of Armaguard’s business model, with the firm dependent on subsidies from major bank, major retailers and Australia Post.
This is in spite of Armaguard winning clearance from the ACCC in 2023 to takeover Prosegur, it major rival. This delivered Armaguard a market share of cash-in-transit in the order of 90 per cent.
The CFR and ACCC said their “preliminary view is that a regulatory framework is likely to be the most proportionate approach to meeting the public interest objective.”
There is little doubt that, following consultation, this will be their final view.
A regulatory framework for the cash distribution sector, the two regulators said, could incorporate:
• better visibility of cash distribution service providers and their capabilities and challenges
• crisis readiness and resolution powers to safeguard the continuity of critical cash distribution services
• regulatory powers to ensure the sector continues to function sustainably, effectively and efficiently by ensuring fair terms, third-party access, and service level standards for regional business customers
• powers for regulator(s) to enforce the framework and pursue penalties where appropriate.
The appointment of an external administrator to a cash-in-transit provider, or merely the likelihood of this happening, would be one trigger for an intervention.
To establish the new regulatory framework and ensure it is appropriately focused on the relevant entities, the cash distribution sector would need to be formally defined in legislation.
This will need to be an urgent legislative priority once parliament resumes next week.
The closing date for submissions on the consultation is August 15th, just under a month away.