The Australian Prudential Regulation Authority (APRA) will require RACQ Insurance Limited and RACQ Bank1 (collectively, RACQ) to develop and implement a comprehensive, APRA-approved, risk transformation program.
This enforcement action comes after APRA identified significant weaknesses in RACQ’s risk governance during a prudential review undertaken this year. Areas of concern include RACQ’s risk and compliance framework and practices, capability and capacity challenges within the risk functions, unclear accountabilities and an immature risk culture.
While APRA acknowledges RACQ’s announcement in June2 that it will make a significant investment in its systems and processes, APRA’s requirement builds on this and seeks to ensure the material risk governance concerns identified are addressed.
In addition to the APRA-approved risk transformation program, RACQ is required to:
- engage a third party to provide independent assurance over the delivery of the risk transformation program and provide periodic reporting to APRA; and
- assign accountability under the Banking Executive Accountability Regime for successful delivery of the risk transformation program to an appropriate, named executive.
APRA Deputy Chair Helen Rowell said: “We expect APRA-regulated entities to have strong risk governance in place and we are disappointed with the current deficiencies identified within RACQ. APRA will continue to work closely with insurers, banks and superannuation trustees to improve risk management practices and strengthen risk frameworks across the financial sector. We will not hesitate to require action and highlight publicly, where appropriate, when entities do not meet these expectations.”
1RACQ Bank is the trading name for Members Banking Group Limited
2RACQ makes significant investment into systems and processes to improve member outcomes