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APRA ‘will not be a police force’, says chairman

The chair of APRA told senators that despite new enforcement powers, the authority will remain, at its heart, a prudential regulator.

Wayne Byres, the chair of the Australian Prudential Regulation Authority, appeared before the Senate economics legislation committee in Canberra on Thursday (21 February), where he was questioned by committee chair and Liberal senator Jane Hume about the prudential regulator's approach to enforcement and the Banking Executive Accountability Regime (BEAR).

The regime, which came into effect for the big four banks on 1 July 2018 and will come into effect for other authorised deposit-taking institutions (ADI) on 1 July 2019, serves as an accountability framework, imposing higher standards of behaviour on banks and their senior executives and directors.

Commissioner Kenneth Hayne in his final royal commission report said the BEAR has “both a conduct and prudential outlook”, and therefore recommended that the APRA and the Australian Securities and Investments Commission (ASIC) jointly administer the regime.

He added that the regime requires ADIs and “accountable persons” to act with “honesty and integrity, and with due skill, care and diligence” while also requiring them to take “reasonable steps to prevent matters from arising that would adversely affect the ADI’s prudential standing or prudential reputation and their actions”.

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The commissioner also suggested that amendments should be made to sections 37C and 37CA of the Banking Act to “make clear that both ADIs and accountable persons must deal with ASIC in an open, constructive and cooperative way, as well as with APRA”.

“We have some new powers and we have asked for those powers for some time. The Parliament is now hopefully giving them to us and it is our intent to use them,” Mr Byres told the committee.

“We’ve wanted them for a reason. We will still be at our heart though a prudential regulator. We will not be all of a sudden a police force. But I think we can do more, particularly if we are well equipped to do so, quicker than we have in the past.”

The prudential regulator is currently reviewing its enforcement strategy with the assistance of an independent expert panel. This review has a wide scope that includes consideration of when to hold individuals to account (including under the BEAR) when it would be appropriate to take enforcement action to achieve general and specific deterrence in appropriate cases, and APRA’s governance and other arrangements in relation to enforcement decisions. 

The report is expected to be completed at the end of March 2019 and published shortly thereafter.

[Related: APRA’s ability to promote stability to be reviewed]

APRA ‘will not be a police force’, says chairman
APRA
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