Mr Lonsdale outlined how his appointment as APRA Deputy Chair will affect responsibilities within the APRA executive group. He said that his role will be focused horizontally across all APRA-regulated sectors (rather than being focussed on a single sector) and include: implementation of the Banking Executive Accountability Regime (BEAR), leading efforts to strengthen APRA’s relationship with other regulators (including the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC) and AUSTRAC), APRA's enforcement review, and investigation into recovery and resolution preparedness and crisis management.

Priorities for 2019

Mr Lonsdale identified a number of policies and actions aimed at ensuring banks, insurers and super funds are 'well-placed to withstand any potential period of tougher economic conditions' (should the need arise).

• Review of enforcement strategy: Mr Lonsdale identified the completion of the review of APRA's enforcement strategy as a key priority. 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 by the end of March 2019 and the final recommendations and APRA's enforcement strategy will be made publish following consideration by APRA.

• APRA will remain a supervision led as opposed to an enforcement led regulator: Mr Lonsdale said that though APRA acknowledged the need to consider 'a stronger appetite for formal enforcement action, including giving greater weight to its strategic use as an industry-wide deterrent', the regulator will not completely alter its approach. Rather, he said APRA will 'remain a supervision-led, rather than enforcement-led, regulator with a focus on pre-emptively tackling problems before they compromise an entity's ability to meet its obligations to beneficiaries, or rectifying adverse outcomes in the best interests of customers'.
• Consultation on the development of a formal prudential framework for 'recovery and resolution' will be a priority in 2019: Mr Lonsdale said that APRA will consult on the development of a formal prudential framework for 'recovery and resolution' to prepare institutions in the event of a 'financial cold snap'. He noted that the passage of legislation expanding APRA's crisis management powers and providing a clear basis upon which it can make prudential standards on resolution would facilitate this and that APRA's proposal to require ADIs to lift their levels of loss absorbing capital outlined in a recent discussion paper, would also support this work. Commenting on APRA's crisis resolution powers, Mr Lonsdale said that 'these are powers APRA hopes never to need however possessing a strong framework to manage failures and crises is a critical component of a resilient financial system'.

[Note: The legislation referred to by Mr Lonsdale appears to be: Financial Sector Amendment (Crisis Resolution Powers and Other Measures) Act 2018 which provides APRA with powers to 'set requirements on resolution planning ensure banks and insurers are better prepared for a crisis' and an expanded set of crisis resolution powers that 'equip APRA to act decisively to facilitate the orderly resolution of a distressed bank or insurer'. Also possibly, Treasury Laws Amendment (Banking Measures No1) Act 2018 which (among other things) provides APRA with a reserve power to make rules in respect of the lending activities of non-ADI lenders.]

• Basel III a priority for 2019: 'With ADIs well on track to meet their "unquestionably strong" increased capital levels, 2019 will see APRA make further advancements towards implementing the final elements of the Basel III capital framework for ADIs' Mr Lonsdale said. He added that a 'key component' will be 'rethinking how Australia's relatively more conservative capital approach can be explained to provide greater transparency about the strength of our banks and more flexibility in times of stress.'
• Re-examination of cases of potential misconduct raised during the Financial Services Royal Commission: Mr Lonsdale said that APRA is re-examining cases of potential misconduct by APRA regulated entities raised during the Financial Services Royal Commission 'where the evidence presented was either new to APRA or contradicted what we had previously been told. That process will continue into 2019, and may well lead to formal enforcement action, should we deem it warranted'.
• Continuing to administer and monitor the BEAR 'to ensure it is being followed and understood' was also identified as a priority for 2019.
• 'Member outcomes package of superannuation reforms': Mr Lonsdale said that APRA's expectation is that the 'member outcomes package' of superannuation reforms will be finalised 'soon' and that this would be an area of 'ongoing focus' for the regulator in 2019. Mr Lonsdale also said the regulator welcomes proposed reforms before Parliament giving it power to direct licensees to take specific actions at an earlier stage – including merging or winding up should that be in the best interests of their members.

[Note: Mr Lonsdale appears to referring to Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 which was introduced into the Senate on 14 September 2017 and has reached second reading stage and Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 which was introduced into the House of Representatives on 14 September and passed the House on 23 October. The Bill is currently at second reading stage in the Senate. Assistant Treasurer Stuart Robert has recently indicated that the government intends to push forward with both Bills and a number of other superannuation reform Bills.]

• Alignment of the capital framework for the private health insurance sector with that used in life and general insurance was also identified by Mr Lonsdale as a priority.

• Financial Services Royal Commission response: Mr Lonsdale said that 'APRA keenly awaits the final report of the Royal Commission. Both the report, and the Government’s subsequent response to its recommendations, will become high priorities for us once they are made known, and we are confident that the financial system will ultimately emerge stronger from the scrutiny'.