The Australian Prudential Regulation Authority (APRA) has announced that its “enforcement strategy and infrastructure” will be reviewed by John Lonsdale, who became the second deputy chair of the regulator after amendments to the APRA Act to enable the appointment of two deputy chairs passed the Senate in August.
“The review will be a forward-looking examination of APRA’s approach to the use of its enforcement powers to ensure that financial promises made by supervised institutions are met within a stable, efficient and competitive financial system,” the deputy chair said.
“It will assess any legal, practical or structural impediments to APRA taking enforcement action where such action is appropriate.”
Mr Lonsdale, who was previously the deputy secretary of Treasury, added that it is “timely” to examine whether prudential regulator’s “traditional approach” of “prioritising prevention and rectification” can be “augmented by greater enforcement activity”.
APRA said that it established the enforcement strategy review “in recognition both of new regulatory responsibilities under the Banking Executive Accountability Regime (BEAR), as well as case studies examined by the royal commission”. Commissioner Kenneth Hayne criticised the prudential regulator in his royal commission interim report for having rarely taken wrongdoers to court.
“This review presents an opportunity for APRA to strengthen further its supervisory toolkit and reinforce sound prudential outcomes,” the deputy chair said.
The review will provide recommendations on:
- the breadth of issues APRA seeks to address through public and non-public enforcement action;
- the considerations in determining when APRA should take enforcement action to hold entities and individuals accountable, including under BEAR and other powers;
- the considerations in determining whether and when it may be appropriate for APRA to take public enforcement action, including litigation, to achieve general deterrence effects in appropriate cases; and
- APRA’s internal governance, organisation, enforcement strategy, resourcing and other factors relevant to its enforcement function.
Mr Lonsdale will be assisted by an independent advisory panel of experts, including former NSW Supreme Court judge Dr Robert Austin, Australian Competition and Consumer Commission commissioner Sarah Court, and professor Dimity Kingsford Smith, who is the director of the Centre for Law Markets and Regulation at the University of New South Wales.
The regulator said that draft recommendations will be available to APRA members by 28 February 2019, with the final review to be presented to the members by 31 March 2019.
The final review and APRA’s new enforcement strategy is intended to be released publicly afterwards.
Also this month, federal Treasurer Josh Frydenberg announced that the government would inject an additional $58.7 million over two years to “strengthen” APRA’s enforcement powers. Wayne Byres’ chairmanship was also extended for another five years for the sake of “stability” at a time when a number of initiatives and interventions are underway to address housing market challenges and improve accountability at financial institutions.
APRA additionally published the final version of its cross-industry prudential standard, CPS 234, focused on the management of information security at regulated entities, the creation of which was prompted by the “accelerating threat of cyber attacks”.