Federal Treasurer Josh Frydenberg announced on Monday (5 November) that the government is providing the Australian Prudential Regulation Authority (APRA) with an additional $58.7 million to boost its supervisory and enforcement powers after Commissioner Kenneth Hayne criticised the prudential regulator, as well as its sister agency the Australian Securities and Investments Commission (ASIC), for rarely taking alleged offenders to court.
“The new funding will allow APRA to reinforce the resilience and soundness of our financial system at a time of significant reform,” the Treasurer said.
Provided over four years from the 2018–19 financial year, the fresh funding is intended to:
- allow APRA to ramp up its supervisory capabilities by increasing the number of frontline supervisors for financial institutions
- improve APRA’s ability to identify and address new and emerging risk areas by building internal expertise and increasing access to technical specialists outside APRA
- improve APRA’s data collection capabilities so that it can take advantage of inter-agency intelligence sharing
- provide for a review of APRA’s enforcement strategy across the industries it supervises
The commissioner in charge of the financial services royal commission had questioned in his interim report (released at the end of September) whether enforcement needed to be ramped up given the litany of abuses exposed in the hearings this year.
“APRA accepts that it has traditionally examined cases of poor conduct through a prudential risk lens, and has primarily relied on ASIC to ensure that specific cases of misconduct and consumer harm were properly remediated,” the prudential regulator told the royal commission in its response to the interim report.
“Conduct has been viewed as an indicator of risk, but not a direct prudential risk in and of itself unless it was likely to jeopardise the stability of the system or an individual institution.”
The federal Treasurer additionally revealed that the government is extending the role of Wayne Byres, the chair of APRA, for five years, describing the reappointment as “important for stability” as the prudential regulator continues its work on addressing housing market challenges and implementing the new Banking Executive Accountability Regime (BEAR), which serves as an accountability framework, imposing higher standards of behaviour on banks and their senior executives and directors.
APRA last month released a BEAR guidance paper outlining expectations regarding how authorised deposit-taking institutions (ADIs) can effectively implement the regime with regards to matters such as submitting accountability statements and accountability maps, establishing new remuneration policies for accountable staff members and other stakeholders, and notifying APRA of any accountability-related changes or breaches of accountability obligations within 14 days of the change.
In August, prior to the Liberal Party leadership spill, the federal government had also announced that it would provide a further $70 million to ASIC over two years, including $8 million to embed up to 20 supervisory officers into the big four banks and AMP to “monitor governance and compliance actions” across extended periods of time, and $26.2 million to “accelerate and increase the intensity of ASIC’s enforcement activities” and enhance its capacity to pursue actions for serious misconduct against well-funded litigants through the Enforcement Special Account.