The Australian Prudential Regulation Authority (APRA) has announced its plans in relation to specific recommendations relating to it contained in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The Royal Commission made 10 recommendations requiring APRA to strengthen its prudential and supervisory framework. Of the 10, APRA expects that four will be completed in 2019, and a further five will be completed by the end of 2020. See the APRA Response table.
Royal Commission Referrals
APRA is examining each of the 12 matters in relation to individual
entities that have been referred to it by the Royal
Commission. APRA says this work is already underway and APRA
will liaise with ASIC and other relevant agencies to address
promptly the matters identified.
BEAR Enforcement
APRA is reviewing its enforcement strategy with the assistance of
an Independent Expert Panel. This review includes consideration of
when to hold individuals to account (including under the Banking
Executive Accountability Regime (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 will be completed at the end of March 2019
and published shortly thereafter.
APRA notes that the Commission’s Final Report recommendation of an extension of the BEAR will require legislative change.
APRA’s responses include:
Valuations of land
APRA will release proposed revisions of APS 220 by the end
of the first quarter of 2019 to: require that internal
appraisals of the value of land taken or to be taken as security
should be independent of loan origination, loan processing and loan
decision processes; and provide for valuation of agricultural
land in a manner that will recognise, to the extent possible:
– the likelihood of external events affecting its realisable
value; and – the time that may be taken to realise the
land at a reasonable price affecting its realisable value.
The final version of the standard is expected to be completed by the end of 2019.
BEAR product responsibility
APRA will release proposed requirements for accountability
under the BEAR for product design, delivery and maintenance
management and customer remediation in the second quarter of 2019,
with a view to finalising a requirement by end 2019.
Prudential Standard SPS 250 changes for RSE licensees
included related party arrangements and member status
process
Formal consultation on revised standards will commence shortly
after the release of the post-implementation review report of the
superannuation prudential framework, in the second quarter of 2019,
with a view to having a new standard finalised in 2020.
Supervision of remuneration
APRA will release proposed revisions to Prudential Standard CPS 510
by mid-2019 which will incorporate the Royal Commission’s
recommendations, recent lessons from APRA’s supervisory
activity, the CBA Prudential Inquiry as associated self-assessments
by other entities, and relevant international guidance.
APRA’s intention is to have a final standard determined in
2020. Work on the design and implementation of remuneration systems
and supervision of culture and governance is subject to
funding.
ASIC and APRA joint memorandum on
co-operation
APRA and ASIC are reviewing the cooperation and coordination
arrangements between the two agencies, including revising the
existing Memorandum of Understanding. This review will be completed
by 2019.
Application of the BEAR to APRA
APRA will develop and publish accountability statements for
itself before the end of 2019.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
