5 Co-regulation by APRA and ASIC

The original conception of APRA from the Wallis Inquiry has shaped how it perceives its role, how it performs its functions and how it exercises its powers. Mr Wayne Byres, APRA’s Chair, put the matter plainly:

[W]e don’t see ourselves as sometimes a prudential regulator and sometimes a conduct regulator. Our Act, our mandate, our name, the statement of expectations – everything that we have says we are a prudential regulator, but we do have these other things that take us into the conduct territory. But if we’re going to be judged as to what we are, we’re a prudential regulator.[1]

In the course of the Commission’s work, questions have arisen about the scope of APRA’s remit and APRA’s ability and willingness to exercise its powers. These questions have been raised in circumstances where misconduct has been observed in institutions regulated by APRA and at a time where it is increasingly acknowledged, both domestically and internationally,[2] that the conduct and governance of an institution are relevant to the prudential supervision of that institution.[3]

The Commission’s task, directed heavily as it is by the Terms of Reference to misconduct, did not involve an examination of all of APRA’s work. Instead the examination of APRA focused largely on two issues: the supervision of the superannuation system and of the BEAR. I deal with each below.

[1] Transcript, Wayne Byres, 30 November 2018, 7449–50.

[2] See, eg, FSB, Guidance on Supervisory Interaction with Financial Institutions on Risk Culture: A Framework for Assessing Risk Culture, 7 April 2014 <www.fsb.org/wp-content/uploads/140407.pdf>.

[3] I discuss those developments further in the chapter on culture, governance and remuneration.