2020 update on APRA-ASIC engagement
The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) each play important roles in protecting the Australian community through a safe, fair, competitive and efficient financial system. Both agencies have a longstanding commitment to working together to facilitate cooperation and collaboration and to strengthen the effectiveness and contribute to the efficiency of regulatory outcomes across the financial sector.
In 2019, this commitment was reinforced through a new Memorandum of Understanding (MoU) underpinned by a revised engagement structure comprising regular strategic discussions between the APRA Members and ASIC Commissioners, and supported by largely industry-based standing committees of senior representatives from each agency. The committees have facilitated strategic discussions on key risks, greater information sharing, and coordination on supervisory and enforcement matters.
This statement fulfills the agencies’ obligation under the MoU to report annually on their engagement activities.
Over the past 12 months the agencies have demonstrated strengthened collaboration in important areas. For example:
- COVID-19 amplified the need for alignment in response to common problems. Both agencies worked together with the banking industry on measures to help customers faced with loan repayment difficulties because of the pandemic. APRA adjusted capital and provision requirements for loan deferrals, and worked together with ASIC to ensure that messaging to ADIs, particularly in relation to expectations, was consistent and aligned. In August, the agencies worked jointly with industry on plans to review the position of all customers who had deferred loan repayments and the agencies continue to work on the ongoing performance of the broader credit portfolio. Central to this alignment was that data needed by each agency was captured in a single request.
- Each agency has available an array of enforcement tools that each seek to use efficiently and effectively. Conduct issues can give rise to breaches of legal requirements under the respective remits of both agencies. In two cases – Tidswell and Westpac – the agencies agreed that ASIC should be the lead regulator to address alleged misconduct. These decisions were designed to avoid significant duplication in the investigative process for each regulator and the institutions, and focus the institutions on a single regulatory response.
- In superannuation, APRA and ASIC have worked together to ensure guidance to trustees was integrated, including jointly informing all licensees on 1 April 2020 of current and new obligations prompted by the crisis. The agencies have also collaborated on developing and implementing a single pandemic data collection.
- APRA and ASIC’s work to date on business interruption insurance is an example of the agencies proactively responding to an emerging risk early in the pandemic crisis. The agencies continue to share data and analysis to understand the extent of industry exposure, and policyholder protection and solvency implications. APRA and ASIC actively participated in a cross-agency working group with the Treasury and the Australian Financial Complaints Authority (AFCA) to assess the extent of the issue and advance the business interruption insurance test case with industry.
- APRA and ASIC have aligned communication on key policy changes, such as recent updates to the agencies’ respective frameworks because of changes to accounting standards relating to insurance contracts.
Both agencies remain committed to maintaining close coordination as policy and supervision initiatives suspended in response to the crisis begin to recommence.
In 2021, APRA and ASIC’s cooperation will be reinforced by the implementation of Royal Commission Recommendation 6.9 via a statutory obligation to cooperate, share information and notify each other of suspected entity breaches of laws administered by the other. This legislation will further formalise this commitment and the progress made to date to closer collaboration and information sharing.
Key regulatory priorities of 2021 - including implementation of the latest consumer credit and superannuation reforms, preparation for the Financial Accountability Regime (FAR), and improving performance assessment frameworks - emphasise the continued importance of collaborating and working effectively and efficiently together.
More importantly, APRA and ASIC will continue to work together on supporting the financial system, businesses and consumers as they enter the next stage of recovery from the COVID-19 pandemic.