APRA have highlighted its plan to take a much tougher approach to enforcement and to use the full range of its formal powers to deter bad practices, in an announcement made following an internal “Enforcement Review” this week. APRA will take up all seven proposals put up by the review, which was set up after the Hayne royal commission questioned the regulator’s perceived reluctance to use its court-based sanction powers. The review informs how APRA will use its enforcement powers to prevent and address serious prudential risks, and to hold entities and individuals to account.
APRA Chair Wayne Byres said APRA would implement all the recommendations, including:
- adopting a “constructively tough” appetite to enforcement and setting it out in a board-endorsed enforcement strategy document;
- ensuring APRA supervisors are supported and empowered to hold institutions and individuals to account, and strengthening governance of enforcement-related decisions;
- combining APRA’s enforcement, investigation and legal experts in one strengthened support team, and ensuring resources are available to support the pursuit of enforcement action where appropriate; and
- strengthening cooperation on enforcement matters with the Australian Securities and Investments Commission (ASIC).
APRA Deputy Chair John Lonsdale, who conducted the review said to remain effective “we must continue to evolve and improve, especially in response to the ways in which non-financial risks, such as culture, can impact on prudential outcomes”.
Appetite For Enforcement
The new approach has been described as a new “enforcement appetite” and Lonsdale said APRA will be more willing to use the full range of its formal powers – such as direction powers and licence conditions – to achieve prudential outcomes and deter unacceptable practices.
In a statement from APRA, Byrnes noted that as a supervision-led prudential regulator, APRA’s primary focus will continue to be on resolving issues before they cause problems and in most cases, APRA will continue to achieve this through non-formal tools.
In a warning to the industry, he continued; “However, formal enforcement is an important weapon in our armoury when non-formal approaches are not delivering prudential outcomes. Particularly as our powers have recently been strengthened in a number of areas, the new Enforcement Approach will ensure we make use of those powers as the Parliament intended. That means that in future, APRA will be less patient with the time taken by uncooperative entities to remediate issues, more forceful in expressing specific expectations, and prepared to set examples using public enforcement to achieve general deterrence.”