Details of APRA's enforcement review announced

3 minute read  18.11.2018

APRA has released the terms of reference and named the panel who will advise on the enforcement review. The Australian Prudential Regulation Authority (APRA) has released the terms of reference for the review of the regulator's enforcement strategy and approach which will be conducted over the first three months of 2019.

The Australian Prudential Regulation Authority (APRA) released the Terms of Reference for a review of its enforcement strategy on 12 November.  The review will make recommendations on which enforcement issues APRA should consider acting on, what factors the regulator should take into account, and whether there are any practical or legislative impediments to APRA pursuing a stronger approach.

The review will be completed over the first three months of 2019 and the final recommendations and APRA's enforcement strategy will be released publicly (following consideration by APRA).  APRA writes that the Review is being undertaken in recognition of both its new regulatory responsibilities under the Banking Executive Accounting Regime (BEAR), and in light of the case studies examined by the Financial Services Royal Commission.

Key Points

Scope of the review

Forward looking review: The Review will conduct a 'forward looking examination of APRA’s approach to the use of enforcement to achieve its prudential objective of ensuring that financial promises made by its supervised institutions are met within a stable, efficient and competitive financial system (the Review)'.

Impediments to enforcement action? The Review will examine APRA’s current enforcement strategy and infrastructure, and in particular, how it interacts with APRA’s core supervisory approach. It will assess any legal, practical or structural impediments to APRA taking enforcement action where such action is appropriate.

Recommendations: The Review will make recommendations on the following:

  • the breadth of issues APRA seeks to address through public and non-public enforcement action;
  • the considerations APRA should take into account when determining when to take enforcement action, including under the Bank Executive Accountability Regime (BEAR) and other powers;
  • the considerations APRA should take into account when determining whether it may be appropriate 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 any other factors relevant to APRA’s enforcement function.

Areas of focus: In examining these issues, the terms of reference state that the review will focus on the following.

  • 'The relationship between APRA’s supervisory approach and enforcement action;
  • APRA’s process for identifying candidate enforcement actions; 
  • APRA’s decision-making process on whether to take enforcement action;
  • APRA’s approach to breach reporting and whistle-blowers;
  • the weight given to factors (including but not limited to cost, timeliness, remediation, precedential value) in determining whether to take enforcement action;
  • APRA’s approach to publicly disclosing enforcement priority areas;
  • whether internal organisational change would be required to achieve an appropriate level of enforcement action;
  • whether the resources and skill sets currently within APRA are adequate to achieve an appropriate level of enforcement action;
  • whether there is greater need for APRA to more closely cooperate with other regulatory agencies when dealing with enforcement-related matters;
  • whether the current and proposed legislative framework is adequate to support the recommended approach; and
  • any other relevant matters agreed by the APRA Members from time to time'.

Governance

The Review will be conducted by APRA Deputy Chair John Lonsdale and supported by APRA staff and external advisors as necessary.

An external advisory panel comprising: Dr Robert Austin (Former NSW Supreme Court Judge), Commissioner Sarah Court (Australian Competition and Consumer Commission) and Professor Dimity Kingsford Smith (Holder of the MinterEllison Chair in Risk and Regulation at UNSW Law) has been appointed to provide an expert perspective on matters arising from the Review.

Timing

  • Draft recommendations will be available to APRA Members by 28 February 2019 with the final Review to be presented to the APRA Members by 31 March 2019.
  • Following consideration of the Review’s recommendations, APRA expects to release publicly both the final review and APRA’s enforcement strategy.

[Note: In his recent speech to the FINSIA Regulators’ Event 2018 entitled APRA in 2019: an evolving approach, a consistent purpose, Australian Prudential Regulation Authority (APRA) Deputy Chair John Lonsdale outlined the regulator's policy priorities for 2019.  A key priority is the completion of the enforcement review.  See: Governance News 19/11/2018.] [Source: APRA Terms of Reference: Enforcement Strategy Review 12/11/2018]

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