In a market update speech, Price said that people are prone to significant and systematic behavioural biases.
Specific attributes of financial products, such as their complexity, risk, uncertainty and long-term nature, could also accentuate a natural inclination to rely on behavioural biases.
“Appreciation of these behavioural considerations provides opportunities to design regulatory tools that take into account consumer behaviour and decision making, and that allow regulators to target market-improving actions”, he said.
The limitations of disclosure meant that it alone had not always been sufficient to enable consumers to make informed decisions and purchase products and services.
“Internationally, regulators are moving beyond traditional conduct and disclosure regulation towards regulatory tools that can better address the problems investors and financial consumers experience in financial markets.”
Price cited the UK’s Financial Conduct Authority as an example, which has a spectrum of product intervention’powers that enables it to address problems seen in specific products.
He said that similarly, “there may be opportunities in Australia to broaden the regulatory toolkit available to regulators to address the types of problems investors and financial consumers experience in financial decision making”.
