On 12 November 2018, the Australian Prudential Regulation Authority (APRA) announced a comprehensive, forward-looking review of its enforcement strategy (the Review) and released accompanying Terms of Reference (see Appendix 1).
The Review was prompted by the Government introducing the Banking Executive Accountability Regime (BEAR), which gave APRA new and stronger powers with respect to banks and their directors and senior executives (accountable persons). Further impetus came from two other directions: the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission); and initiatives within APRA’s Corporate Plan 2018-2022 (corporate plan), including increased transparency and broadening supervision and its intensity.
The Review was led by APRA Deputy Chair, John Lonsdale, with support from a secretariat (the Secretariat) comprised of APRA staff and a secondee from the United Kingdom Prudential Regulation Authority (PRA). An independent advisory panel (the Panel) was also appointed to provide an expert perspective on matters arising from the Review. The Panel comprised: Dr Robert Austin, Former Judge, Supreme Court of New South Wales; Commissioner Sarah Court, Australian Competition and Consumer Commission (ACCC); and Professor Dimity Kingsford Smith, Minter Ellison Research Professor of Risk and Regulation, and Deputy Director (Research) of the Centre for Law, Markets and Regulation at the University of New South Wales (see Appendix 2 for biographies).
The Review’s purpose was to examine and make recommendations about APRA’s approach to using enforcement to achieve its prudential objectives. The Review’s recommendations have been informed by internal and external stakeholder engagement and empirical evidence, including an internal scan of APRA’s approach to enforcement and a review of practices of peer regulators (see Appendix 3). The evidence shows that, while enforcement is essential to enable effective prudential regulation, APRA will always have to balance certain factors, such as the need for efficient outcomes and the benefits of transparency versus risks to financial stability, in considering how to meet its mandate in a manner that best protects the Australian community.