The pace of change in the finance sector must be responded to by its regulators. As the market moves, regulators should consider if their structure and processes remain appropriately adapted to market conditions.
ASIC has recently undergone a capability review. APRA has not. I recommend that a formal capability review be undertaken of APRA, with that review being completed as soon as is reasonably practicable after the publication of this Report.
More generally, capability reviews should be seen as part of the regular review of financial regulators. They present an opportunity to consider the operational abilities and requirements of the regulators. That kind of top to bottom consideration is often neglected due to operational demands.
I recommend that both APRA and ASIC be subjected to at least quadrennial capability reviews. Responsibility for the periodic review should rest with the oversight authority. That is not to say that the oversight authority should conduct the review itself. It may, should it wish, appoint an expert panel to undertake the review. But the review should be undertaken at the instruction of the oversight authority and the resulting report provided to both the regulator in question and the oversight authority.
Undertaking capability reviews with reasonable frequency will assist both the regulator and the Government by identifying resourcing and capability gaps. The importance of the financial regulators to the economy demands that they be fit for purpose. Regular, independent reviews will assist in meeting that goal.
Recommendation 6.13 – Regular capability reviews
APRA and ASIC should each be subject to at least quadrennial capability reviews. A capability review should be undertaken for APRA as soon as is reasonably practicable.