Australian Prudential Regulation Authority

Chapter 7 - Governance
 
Governance structure
 
APRA's governance structure comprises a full-time Executive Group of at least three and no more than five Members, as specified in Part 3 of the Australian Prudential Regulation Authority Act 1998. The Executive Group is responsible and accountable for the operation and performance of APRA.
 
APRA has the dual role of regulating institutions in the financial sector and developing the administrative practices and procedures to be applied in performing that regulatory role. In performing and exercising its functions and powers, APRA is required to balance the objectives of financial safety and efficiency, competition, contestability and competitive neutrality and, in balancing these objectives, is to promote financial system stability in Australia.
 
APRA's responsibilities include the development of regulatory and supervisory policies relating to the performance of its role as prudential regulator, including the making of prudential standards under relevant legislation.
 
APRA also acts as a national statistical agency for the Australian financial system and is responsible for administering the Financial Claims Schemes provided for in relevant banking and general insurance legislation.
 
The Executive Group meets formally on a monthly basis, and more frequently as required, to discuss and resolve the major prudential policy, supervisory and strategic issues facing APRA at the time. It also holds Management Group meetings with APRA's senior management team at least weekly for high-level information-sharing and decisions on more routine supervisory and organisational matters.
 
Members' attendance at Executive Group meetings from 1 July 2010 to 30 June 2011
  Meetings Attended
John Laker 12 12
Ross Jones 12 11
Ian Laughlin 12 10
 
Details on APRA Members are provided below.
 
Risk management in APRA
 
Risk Management and Audit Committee
 
APRA's Risk Management and Audit Committee provides independent assurance and assistance to the Executive Group on APRA's risk management and compliance framework and its external accountability responsibilities.
 
The Committee comprises an external chair, one external member, one member of APRA's Executive Group and one Executive General Manager. In addition, regular attendees at Committee meetings are the General Manager - Risk Management and Internal Audit, the Chief Financial Officer and a representative of the Australian National Audit Office. The Chairman of APRA may attend by invitation.
 
During 2010/11, the Committee met four times and at those meetings all audit reports were reviewed. The Committee also approved the Risk Management and Internal Audit annual plans and monitored APRA's Enterprise Risk Management Framework.
 
The members of the Committee in 2010/11 were:
 
Ms Elizabeth Alexander AM
BCom (Melb), FCA, FCPA, FAICD
Chair (until 31 August 2010)
 
Ms Alexander was appointed Chair of the Committee in 2003 and in 2008 was reappointed for a further two-year term. Ms Alexander is Chancellor of the University of Melbourne, Chair of CSL Ltd and a non-executive director of the Dexus Property Group and Medibank Private. She is an advisor to Blake Dawson and a former member of the Takeovers Panel. Ms Alexander is a former National President of the Australian Institute of Company Directors and of CPA Australia and an immediate former Deputy Chair of the Financial Reporting Council. A former partner of PricewaterhouseCoopers, she specialised in risk management and corporate governance issues.
 
Mr W Peter Day
LLB (Hons), MBA, FCPA, FCA, FTIA, GAICD
Chair (from 1 September 2010)
 
Mr Day was appointed for a five-year term in 2008 and assumed the role of Chair of the Committee from 1 September 2010. He is Chairman of Orbital Corporation Limited and Centro Retail Limited and a non-executive director of Ansell Limited, SAI Global Limited and Multiple Sclerosis Limited. He also serves as a non-executive director of the Accounting Professional and Ethical Standards Board.
 
Mr Day was, for seven years until 2007, Chief Financial Officer of Amcor Limited. He is a former Chairman of the Australian Accounting Standards Board, has participated in the setting of international accounting standards and was Deputy Chairman of the Australian Securities and Investments Commission from 1997 to 1999.
 
Ms Fiona Bennett
BA(Hons), FCA, FAICD, FAIM
External member (from 1 January 2011)
 
Ms Bennett was appointed for a three-year term on 1 January 2011. She is a non-executive director of two ASX-listed companies — Hills Holdings Limited and Boom Logistics Limited — and a number of other entities including Alfred Health, the Institute of Chartered Accountants and the Legal Services Board (Victoria). During her executive career, Ms Bennett held senior executive positions at BHP Billiton Limited and Coles Group Limited and has been Chief Financial Officer at several organisations in the health sector.
 
Mr Ian Laughlin
APRA Member
 
Mr Keith Chapman
Executive General Manager
— Supervisory Support Division
 
Attendance at Risk Management and Audit Committee meetings from 1 July 2010 to 30 June 2011
  Meetings Attended
Elizabeth Alexander 1 1
Peter Day 4 4
Keith Chapman 4 3
Fiona Bennett 2 2
Ian Laughlin 4 4
 
Risk Management and Internal Audit unit
 
The Risk Management and Internal Audit unit plays an important role in APRA's governance, assurance and compliance framework through a detailed and structured approach to the monitoring and assessment of risks and the review of APRA's systems and processes. The unit is independent of APRA's management structure and has a direct reporting line to the Chair of the Risk Management and Audit Committee and direct access to the Executive Group. It is staffed by officers with extensive experience in risk management, audit, regulated industries and prudential supervision.
 
Central to risk management in APRA, and to the work of the unit, is an Enterprise Risk Management Framework for the identification, monitoring and management of risk. The Framework and its reporting processes were implemented in 2009/10 and enhanced during the past year. This APRA-wide approach has established defined risk categories that capture any substantial risk to APRA's mandate and objectives. For each risk category, an appropriate member of APRA's Management Group is allocated responsibility for the ongoing review, management and reporting of that risk. Risks are reassessed on a regular basis. The unit provides APRA's Executive Group and its Risk Management and Audit Committee with consolidated risk reports on a quarterly basis. Further enhancements to the Framework in which the unit is involved include a refinement to APRA's risk appetite statement, which lies at the heart of the Framework.
 
Each year, following consultation with APRA management and staff and an assessment of APRA's strategies and risks, a broad-ranging and robust program of internal audits is developed and subsequently approved by the Executive Group and endorsed by the Risk Management and Audit Committee. The program covers specific aspects of APRA's supervisory and operational processes and its financial systems, and includes reviews of compliance with both internal and external requirements. Audit reviews identify and rate risks, and make recommendations aimed at improving APRA's internal controls and processes. The reviews also set out detailed and agreed management action plans and timetables to address issues identified. The unit monitors the implementation of agreed actions, undertakes follow-up reviews and reports the results of those reviews to the Executive Group and the Risk Management and Audit Committee.
 
Fraud risk management is an ongoing focus within APRA and a comprehensive fraud control framework in line with Government requirements is in place. All audits undertaken by the unit assess whether potential fraud exposures are appropriately addressed by APRA's processes and controls. There were no incidents of internal fraud reported for the year. Compulsory annual online fraud awareness training is delivered to all staff and APRA management makes formal six-monthly attestations on any fraud identified and actions taken.
 
Other governance matters
 
The Statutory report provides details of various other aspects of governance in APRA, including executive and consultative committees.
 
APRA Members
 
Dr John Laker AO
 
BEc (Hons 1) (Syd), MSc PhD (London)
Chairman and Member
 
Dr Laker was appointed as a Member and Chairman of APRA on 1 July 2003, and was reappointed for a second five-year term commencing 1 July 2008.
 
Dr Laker is APRA's representative on the Reserve Bank of Australia's (RBA) Payments System Board, the Council of Financial Regulators, the Basel Committee on Banking Supervision and the Trans-Tasman Council on Banking Supervision. Dr Laker worked in the Commonwealth Treasury and International Monetary Fund before joining the RBA in 1982. He held senior positions in the economic, bank supervision and international areas before becoming the RBA's London-based Chief Representative in Europe from 1991 to 1993. On his return to Australia, Dr Laker took up the position of Assistant Governor (Corporate Services) and, in 1998, was appointed Assistant Governor (Financial System) and Deputy Chair of the RBA's Payments System Board. Dr Laker was made an Officer of the Order of Australia on Australia Day 2008 for services to the regulation of the Australian financial system and to the development and implementation of economic policies nationally and internationally.
 
Mr (Kerry) Ross Jones
 
BA, MCom (Newcastle)
Deputy Chairman and Member
 
Mr Jones was appointed as a Member and Deputy Chairman of APRA on 1 July 2003, and was reappointed for a second five-year term commencing 1 July 2008.
 
Mr Jones is also President of the International Organisation of Pension Supervisors, Deputy Chairman of the OECD Working Party on Private Pensions and a member of the International Network for Financial Education. Prior to joining APRA, Mr Jones held the position of Commissioner at the Australian Competition and Consumer Commission (ACCC) with responsibilities for mergers and acquisitions and telecommunications. Mr Jones was also an Associate Professor in the School of Finance and Economics at the University of Technology Sydney (UTS).
 
Mr Ian Laughlin
 
BSc (Qld), FIA, FIAA, FAICD
Member
 
Mr Laughlin was appointed as a Member of APRA on 1 July 2010 for a three-year term.
 
Mr Laughlin is APRA's representative on the Executive Committee of the International Association of Insurance Supervisors and on the Financial Reporting Council. Mr Laughlin has extensive experience in the financial services industry. He has been a non-executive director of AMP Life Limited, serving as Chairman of its Board Audit Committee, Managing Director of the United Kingdom life insurance subsidiaries of AMP (Pearl, London Life and NPI), director of HHG plc and non-executive director of Diligenta Ltd in the United Kingdom. Before then, he held senior management positions in AMP, Suncorp and National Mutual in Australia, New Zealand and Hong Kong. Mr Laughlin has also served on the Council of the Institute of Actuaries of Australia.