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Annual Report 2013 - Chapter 6


Governance Structure
APRA's governance structure comprises at least three and no more than five Members of APRA, as specified in Part 3 of the Australian Prudential Regulation Authority Act 1998. In practice, there are three full-time Members and they comprise APRA's Executive Group, which is responsible and accountable for the operation and performance of APRA.
APRA has responsibility for regulating institutions in the financial sector and for the development of prudential and supervisory policies relating to its role as prudential regulator, including the making of prudential standards under relevant legislation.
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 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 major prudential policy, supervisory and strategic issues facing APRA. 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 2012 to 30 June 2013
Member Meetings Attended
John Laker 26 24
Ross Jones 26 21
Ian Laughlin 26 25
Details on APRA Members are provided on pages 98-99 of this Report.
The Statutory Report provided in Chapter 9 gives details of various other aspects of governance in APRA, including executive and consultative committees.
Risk Management in APRA
Risk Management and Audit Committee
APRA's Risk Management and Audit Committee provides independent assurance and assistance to APRA's Executive Group on APRA's risk management policies and practices, internal control and compliance frameworks and its external accountability responsibilities.
The Committee comprises an external chair, one external member and one member of APRA's Executive Group. Up until August 2012, one of APRA's Executive General Managers was also a member of the Committee. Following consultation and review, the APRA Members decided that the Committee should have a majority of independent members and the necessary changes to the Committee's Charter were approved in October 2012. As a result, the Executive General Manager now attends Committee meetings as an invitee. Other regular attendees at Committee meetings are the General Manager - Risk Management and Internal Audit, the Chief Financial Officer, the APRA Secretary and representatives of the Australian National Audit Office. The Chairman of APRA and other APRA executives may attend by invitation.
During 2012/13, the Committee met five times and at those meetings all audit reports were reviewed. The Committee approved the Risk Management and Internal Audit annual plans and monitored progress against these plans; it also monitored the operation of APRA's Enterprise Risk Management Framework. At the August 2013 meeting, the Committee made an attestation to the APRA Chairman that reliance could be placed on APRA's systems and controls applied in preparing the annual accounts.
The members of the Committee in 2012/13 were:
Mr W Peter Day
Mr Day was appointed for an initial five-year term in 2008 and assumed the role of Chair of the Committee from 1 September 2010. He has been reappointed for a further term of two years from 1 September 2013. Mr Day is Chairman of Orbital Corporation Limited and a non-executive director of Ansell Limited, Federation Centres Limited and SAI Global Limited. He also serves on 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
External member
Ms Bennett was appointed for a three-year term on 1 January 2011. She is Chairman of the Legal Services Board (Victoria) and a non-executive director of Hills Holdings Limited, Boom Logistics Limited and Beach Energy Limited.
During her executive career, Fiona 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 - Diversified Institutions Division (until 20 August 2012).
Attendance at Risk Management and Audit Committee meetings from 1 July 2012 to 30 June 2013
Attendee Meetings Attended
Peter Day 5 5
Fiona Bennett 5 5
Ian Laughlin 5 5
Keith Chapman* 1 1
* Four additional attendances as invitee.
Risk Management and Internal Audit
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 General Manager -Risk Management and Internal Audit has a direct reporting line to the Chair of the Risk Management and Audit Committee and direct access to the Executive Group. The unit is staffed by officers with extensive experience in risk management, audit, regulated industries and prudential supervision. The General Manager - Risk Management and Internal Audit also attends Management Group meetings as an observer.
APRA's Enterprise Risk Management Framework is central to the identification, monitoring and management of risk within APRA and to the work of the unit. An APRA-wide risk management framework is in place, including an articulation of APRA's risk appetite. It covers substantial risks to APRA's mandate and objectives, each captured in a defined category. A member of APRA's Management Group is allocated responsibility for the ongoing review, management and reporting of each such risk. Risks are reassessed on a regular basis and the unit provides APRA's Executive Group and the Risk Management and Audit Committee with consolidated risk reports on a quarterly basis. In 2012/13 the unit developed an online risk management training course, which all staff were required to undertake to assist them in understanding their risk management responsibilities.
Each year, following consultation with APRA management and an assessment of APRA's strategies and risks, a broad-ranging and robust program of internal audits is developed by the unit and subsequently approved by the Executive Group and endorsed by the Risk Management and Audit Committee. The risk-based program covers specific aspects of APRA's supervisory and operational processes and its financial systems, including reviews of compliance with both internal and external requirements. Audit reviews identify and rate risks, and make recommendations aimed at improving APRA's internal control environment and processes. The reviews also set out detailed and agreed management action plans and timeframes to address issues identified. The unit monitors the implementation of agreed actions on a quarterly basis, undertakes follow-up reviews and reports the results of those reviews to the Executive Group and the Risk Management and Audit Committee.
APRA has an ongoing focus on fraud risk management and a 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 that any identified fraud has been reported.
APRA has a range of external accountabilities and, to ensure compliance, a comprehensive APRA-wide compliance framework based upon the relevant Australian Standard has been put in place and is being expanded. The responsibility for monitoring and ongoing development of this framework is with the Secretary.
APRA Members
Dr John Laker AO
Photo: 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. His term as a Member and Chairman was extended for a further year commencing 1 July 2013.
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 its governing body, and the Trans-Tasman Council on Banking Supervision. He is also a director of the Centre for International Finance and Regulation. 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. Dr Laker was appointed Assistant Governor (Corporate Services) in 1994 and, in 1998, 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 in 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
Photo: Mr (Kerry) Ross Jones
BA, MCom (Newcastle)
Deputy Chairman and Member
Mr Jones served as a Member and Deputy Chairman of APRA from 1 July 2003 to 30 June 2013.
During this period, Mr Jones was 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 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
Photo: Mr Ian Laughlin
Deputy Chairman and Member
Mr Laughlin was appointed as a Member of APRA on 1 July 2010 for a three-year term and was reappointed as a Member and appointed Deputy Chairman for a two-year term commencing 1 July 2013.
Mr Laughlin is APRA's representative on the Executive Council 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 is also a Fellow of the Institute of Actuaries of Australia and has served on its Council.
Mrs Helen Rowell
Photo: Mrs Helen Rowell
BA (Macquarie), FIAA
Mrs Rowell was appointed as a Member of APRA on 1 July 2013 for a five-year term.
Mrs Rowell joined APRA in 2002 as General Manager - Industry Technical Services and has held other senior roles including General Manager - Policy Development, General Manager - Diversified Institutions Division and Executive General Manager - Supervisory Support Division. Mrs Rowell was the chair of APRA's general insurance industry group from 2006 to 2011. Mrs Rowell has represented APRA at various subcommittees of the International Association of Insurance Supervisors. She co-chairs the Joint Forum Financial Conglomerates Committee and also represents APRA on the Financial Stability Board's Supervisory Intensity and Effectiveness Group. Prior to joining APRA, Mrs Rowell was a partner at the international consulting firm Towers Perrin. She is also a Fellow and past President of the Institute of Actuaries of Australia.