APRA is a forward-looking regulator that seeks to identify prudential risks proactively and take action to prevent harm before it occurs. APRA’s remit involves regulating financial entities in accordance with the prudential laws of the Commonwealth, setting prudential standards for those entities, monitoring compliance with those laws and standards through day-to-day supervision, and intervening early to resolve issues.
In seeking to deliver on its mandate, APRA has a range of formal and non-formal tools available. Non-formal approaches include supervisory methods and tools such as prudential and thematic reviews, financial analysis, heightened engagement and reporting requirements. APRA also has a broad range of formal enforcement powers that it can use to deliver its mandate. Enforcement in this context is not limited to taking court-based action, rather it refers to the use of APRA’s range of formal powers – such as powers to direct entities to take or cease particular actions, or impose licence conditions on the way in which a business must operate.
Much of APRA’s work is achieved through using non-formal approaches and working cooperatively with entities to identify and rectify problems before they threaten the ability of an entity to meet its financial promises. However, APRA is prepared to take enforcement action to deliver its prudential mandate when appropriate, including where non-formal approaches are not delivering satisfactory outcomes due to a lack of cooperation from an entity or individual.
This means that APRA will be prepared to use enforcement to prevent and address serious prudential risks and to hold entities and individuals to account. APRA may do this well before the risks (whether financial, operational or behavioural) present an imminent threat to financial viability. Where entities or individuals are failing to meet prudential obligations, APRA will act quickly and forcefully, and be willing to set public examples to deter unacceptable practices from occurring in the future.
APRA's Enforcement Approach
On 16 April 2019, APRA released its Enforcement Approach (the Approach). The Approach sets out how APRA will use its enforcement powers to prevent and address serious prudential risks, and to hold entities and individuals to account.
The release of the Approach, which has been endorsed by the APRA Board, implements recommendation two of the Final Report of the Enforcement Strategy Review.
Enforcement Strategy Review
From November 2018 to March 2019, APRA conducted an extensive, forward-looking review of its enforcement strategy (the Review). The Review examined the appropriateness of APRA’s enforcement strategy and infrastructure, and assessed how enforcement should interact with APRA’s core role of prudential supervision.
The Review was led by APRA Deputy Chair John Lonsdale, who was supported by APRA staff and an independent advisory panel of experts.
This panel comprised:
- Dr Robert Austin, Former Judge, Supreme Court of New South Wales;
- Commissioner Sarah Court, Australian Competition and Consumer Commission; and
- Professor Dimity Kingsford Smith, Minter Ellison Research Professor of Risk and Regulation and Deputy Director (Research) of the Centre for Law, Markets and Regulation at the University of New South Wales.
The Final Report of the Review was presented to APRA Members on 29 March 2019.
Since 1 July 2008, APRA may apply to the Federal Court of Australia to disqualify an individual from holding a senior role within the industries supervised by APRA.
You can find more information about the disqualification process, and view the Disqualification Register of individuals who have been disqualified from holding prudentially significant roles within APRA-regulated entities.
Under the Banking Executive Accountability Regime (BEAR), which took effect from 1 July 2018 for large authorised deposit-taking institutions (ADIs), APRA has the power to disqualify ‘accountable persons’ registered under Part IIAA of the Banking Act 1959 – without applying to the Federal Court. This power will apply to small and medium ADIs from 1 July 2019.
You can find more information about the BEAR, including relevant legislation and explanatory notes.
APRA may accept an enforceable undertaking (EU) from an institution or individual in connection with a matter in relation to which APRA has a function or power. EUs can be used as an alternative to commencing formal legal action, particularly when an institution or an individual has made particular admissions to APRA concerning their conduct.
You can see a register of Enforceable undertakings APRA has accepted from people or corporations since 1 January 2005.
Infringement Notices may be issued for a breach of certain provisions of the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Financial Sector (Collection of Data) Act 2001 (FSCOD Act).
The guidelines below provide background information and general guidance on APRA’s approach to issuing infringement notices under the SIS Act and the FSCOD Act.