Move to ramp up finance regulator's power
Proposals released in a discussion paper today to muscle up the Australian Prudential Regulation Authority's powers and reduce red tape by simplifying its regulatory powers across the various acts it administers, will spark huge interest within the industry between now and the December closing date for submissions.
Australia came through the GFC relatively unscathed but regulators have been working with their international counterparts to ensure a streamlined approach to regulation.
APRA is responsible for the banking, insurance and superannuation sectors. As such there is a lot of crossover between the various acts. There has been a lot of global pressure to reform the superannuation industry after a number of controversies put the spotlight on the lack of disclosure in the industry.
To this end, the minister for financial services Minister Bill Shorten has released a package of proposals for discussion with a view to implementing some of them and revising others.
From the superannuation industry's perspective, some of the reforms are necessary to safeguard the sector from any nasty blow-ups.
A key proposal is to provide APRA with the power to take pre-emptive action to remove trustees or executives. Widening APRA's powers to become pre-emptive gives it the added clout to identify issues and individuals and head them off before they become a serious problem.
This is an important proposal because it is virtually impossible to remove a trustee under the present legislation. There is also limited transparency in cross-directorships and potential conflicts of interest.
In releasing the proposals paper, Strengthening APRA's Crisis Management Powers, Mr Shorten made the statement: “A safe and well functioning financial sector is essential to the wellbeing of all Australians.”
APRA has made it clear during Senate estimates hearings that it wants more powers, particularly during a crisis.
It will be interesting to see where this leaves Members Equity Bank and APRA.
In the case of the $1.3 trillion super industry, governance has become a key are of focus for APRA. It has also become a key focus of the industry itself with the peak body for retail funds, the Financial Services Council, recently proposing super boards have a majority of independent directors and an independent chair.
The industry super fund peak body, the Industry Super Network, responded with an 18-page briefing note and a press release that criticised some of the FSC's proposals.