4 APRA’s remit

APRA is the prudential ‘peak’ of the twin peaks model established following the recommendation of the Wallis Inquiry.[1]

APRA is responsible for administering a wide range of legislation,[2] most relevantly the Banking Act 1959 (Cth) (the Banking Act), the Life Insurance Act 1995 (Cth) (the Life Insurance Act), the Insurance Act 1973 (Cth) (the Insurance Act)[3] and the SIS Act.[4] Under each Act, APRA is responsible for (among other things):

  • the licensing,[5] authorisation[6] or registration[7] of the relevant entity subject to the Act;
  • the suspension,[8] removal,[9] disqualification,[10] revocation[11] or cancellation[12] of that licence (and persons within an entity) issued under the Act;
  • giving directions where it believes an entity has failed to comply with the Act;[13]
  • conducting investigations where it believes there is a breach of the Act;[14]
  • determining prudential standards for conduct relating to prudential matters.[15]

APRA’s administration of all of these matters takes a prudential focus. That focus reflects the foundational promises made by institutions to customers. Authorised deposit-taking institutions (ADIs) and insurers promise depositors and insureds that they will be paid what they are due when the occasion (and the contract) demands it. APRA’s regulatory focus is on ensuring ADIs and insurers do not fail and can therefore meet those promises.

By contrast with the promise of ADIs and insurers, the promise of the superannuation trustee is to manage the member’s account in a particular way, in accordance with the covenants provided under the SIS Act. No particular outcome is promised.[16] Instead, the trustee promises (covenants) to exercise powers and perform its duties in the best interests of beneficiaries.

[1]See Wallis Inquiry, Final Report, 17–24.

[2]See, eg, the legislation listed in the definition of ‘prudential regulation framework law in APRA Act s 3(1).

[3]APRA shares administration of the Life Insurance Act with ASIC: see Life Insurance Act s 7.

[4]APRA shares administration of the SIS Act with ASIC and the Commissioner of Taxation: see SIS Act ss 3(1), 6.

[5]SIS Act s 29D.

[6]Banking Act s 9; Insurance Act s 12(1).

[7]Life Insurance Act s 21.

[8]SIS Act s 133.

[9]Banking Act s 23; Insurance Act s 27.

[10]Banking Act s 21; Insurance Act s 25A; Life Insurance Act s 245A; SIS Act s 126H.

[11]Insurance Act s 15; Life Insurance Act s 26.

[12]SIS Act s 29G.

[13]Banking Act s 11CA; Insurance Act s 104; Life Insurance Act s 230B; SIS Act s 29EB.

[14]Banking Act s 61; Insurance Act s 52; Life Insurance Act s 137; SIS Act s 263.

[15]Banking Act s 11AF; Insurance Act s 32; Life Insurance Act s 230A; SIS Act s 34C.

[16]Except by defined benefit superannuation funds, and they are a small and diminishing number of funds.