APRA announces Terms of Reference for enforcement strategy review

The Australian Prudential Regulation Authority (APRA) today announced Terms of Reference for a review of its enforcement strategy.

The Review will be led by APRA Deputy Chair John Lonsdale, supported by APRA staff and external advisers as necessary. Mr Lonsdale will be assisted by an independent advisory panel of experts in the administration of law and regulatory enforcement. The panel comprises former NSW Supreme Court Judge Dr Robert Austin, ACCC Commissioner Sarah Court and Professor Dimity Kingsford Smith, holder of the Minter Ellison Chair in Risk and Regulation at UNSW Law, and the Director of the Centre for Law Markets and Regulation, UNSW.

Mr Lonsdale said the review will examine APRA’s current enforcement strategy and infrastructure and how it interacts with APRA’s core supervisory approach.

“The review will be a forward-looking examination of APRA’s approach to the use of its enforcement powers to ensure that financial promises made by supervised institutions are met within a stable, efficient and competitive financial system.

“APRA has taken a range of supervisory actions over many years but it is timely to examine whether APRA’s traditional approach - prioritising prevention and rectification - can be augmented by greater enforcement activity. This review presents an opportunity for APRA to strengthen further its supervisory toolkit and reinforce sound prudential outcomes,” Mr Lonsdale said.

APRA established the enforcement review in recognition both of new regulatory responsibilities under the Banking Executive Accounting Regime, as well as case studies examined by the Royal Commission.

The final Review will be presented to APRA Members by 31 March 2019. Following consideration of the Review’s recommendations, APRA expects to release publicly both the final review and APRA’s enforcement strategy.

Terms of Reference – Review of APRA’s approach to enforcement

Scope

1. The Review will conduct a forward-looking examination of APRA’s approach to the use of enforcement to achieve its prudential objective of ensuring that financial promises made by its supervised institutions are met within a stable, efficient and competitive financial system (the Review).

2. The Review will examine APRA’s current enforcement strategy and infrastructure, and in particular, how it interacts with APRA’s core supervisory approach. It will assess any legal, practical or structural impediments to APRA taking enforcement action where such action is appropriate. 

3. The Review will make recommendations on:

a) the breadth of issues APRA seeks to address through public and non-public enforcement action;
b) the considerations in determining when APRA should take enforcement action to hold entities and individuals to account, including under the Bank Executive Accountability Regime (BEAR) and other powers;
c) the considerations in determining whether and when it may be appropriate for APRA to take public enforcement action, including litigation, to achieve general deterrence effects in appropriate cases; and
d) APRA’s internal governance, organisation, enforcement strategy, resourcing and any other factors relevant to APRA’s enforcement function.

Areas of focus

4. In examining the issues set out above, the Review will focus on:

a) the relationship between APRA’s supervisory approach and enforcement action;
b) APRA’s process for identifying candidate enforcement actions;
c) APRA’s decision-making process on whether to take enforcement action;
d) APRA’s approach to breach reporting and whistle-blowers;
e) the weight given to factors (including but not limited to cost, timeliness, remediation, precedential value) in determining whether to take enforcement action;
f) APRA’s approach to publicly disclosing enforcement priority areas; 
g) whether internal organisational change would be required to achieve an appropriate level of enforcement action;
h) whether the resources and skill sets currently within APRA are adequate to achieve an appropriate level of enforcement action;
i) whether there is greater need for APRA to more closely cooperate with other regulatory agencies when dealing with enforcement-related matters;
j) whether the current and proposed legislative framework is adequate to support the recommended approach; and
k) any other relevant matters agreed by the APRA Members from time to time.

Timing

5. Draft recommendations will be available to APRA Members by 28 February 2019 with the final Review to be presented to the APRA Members by 31 March 2019.

Governance

6. The Review will be conducted by APRA Deputy Chair John Lonsdale and supported by APRA staff and external advisors as necessary.  The APRA Members will be regularly informed on progress over the course of the review.

7. An external advisory panel comprising Dr Robert Austin (Former NSW Supreme Court Judge), Commissioner Sarah Court (Australian Competition and Consumer Commission) and Professor Dimity Kingsford Smith (Director of the Centre for Law, Markets and Regulation, University of New South Wales) has been appointed to provide an expert perspective on matters arising from the Review.