On Tuesday night (22 June), the Senate passed the Financial Regulator Assessment Authority Bill 2021 with amendments. The law’s primary purpose is to establish the Financial Regulator Assessment Authority (FRAA), a body tasked with assessing the effectiveness and capability of ASIC and APRA.
It will become law once the Governor-General gives royal assent.
When he handed down his final report from the royal commission, commissioner Kenneth Hayne had called for a new oversight authority for the financial watchdogs, independent of government, as one of his recommendations.
He envisioned a body staffed by three part-time members and a permanent secretariat that would report to government, at least biennially.
The commissioner had also suggested APRA and ASIC should be subject to capability reviews at least once every four years.
The new bill, however, has provided for an authority with four members, including a chair appointed by a Treasury portfolio minister (Treasurer Josh Frydenberg, Assistant Treasurer and Minister for Housing Michael Sukkar, Minister for Superannuation, Financial Services and the Digital Economy Jane Hume, or Stuart Robert, Minister for Employment, Workforce, Skills, Small Family Business).
The other members in the FRAA will include a departmental member and two other members selected by a Treasury minister.
The authority will be required to undertake an assessment of ASIC and APRA once every two financial years, beginning from next week (1 July). It will also need to report to any Treasury minister on any matter relating to either regulator’s effectiveness and capability, when requested.
APRA declined to comment on the passing of the bill, while ASIC is yet to respond to questions from Mortgage Business. But both regulators have previously signalled they will be looking to proactively work with the new body.
In the 2019-20 federal budget, the government provided $7.7 million over three years from 2020-21 to establish the regulator assessment authority.
The explanatory memorandum for the bill has acknowledged that ASIC and APRA are already subject to an array of external assessment and oversight mechanisms, including ministerial oversight and scrutiny by parliamentary committees.
But the banking royal commission had ruled that parliamentary oversight has limits, including the time available to committee members to prepare for hearings and the training, skill and experience required.
The authority reportedly will be tasked with complementing and expanding on the existing accountability mechanisms that already apply to the regulators, not to duplicate them.
Liberal senator Andrew Bragg took to social media to explain that while the FRAA will not review individual enforcement cases, it will provide systemic scrutiny over the regulators’ enforcement.
“For example, we expect the new super laws and Hayne royal commission reforms will be strongly enforced,” the senator tweeted.
But consumer advocates have sounded warnings. The Financial Rights Legal Centre, CHOICE and the Consumer Action Law Centre made a joint submission to Treasury, where they cautioned they are “not convinced the authority [i.e. FRAA] will achieve better outcomes for consumers, which should be its core purpose”.
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Sarah Simpkins is the news editor across Mortgage Business and The Adviser.
Previously, she reported on banking, financial services and wealth for InvestorDaily and ifa.