Opening Statement to the House of Representatives Standing Committee on Economics - June 2020
John Lonsdale, Deputy Chair - House of Representatives Standing Committee on Economics
Thank you for the opportunity to appear here today to clarify APRA’s role in relation to the ME Bank’s recent remediation plan for its redraw facility issue.
As the Committee is aware, APRA, as the prudential regulator, oversees the prudential risks faced by ME Bank and the bank’s management of these. At its simplest, this means that APRA’s role is to ensure the safety and financial stability of the institution and the protection of depositors.
As with all our supervised institutions, APRA has longstanding, regular and ongoing engagements with ME Bank as part of the supervisory program of work covering a wide range of issues.
APRA’s primary focus in relation to this matter has been to understand and remain alert to any prudential implications, particularly in relation to ME Bank’s operational management and its risk governance frameworks and capability. Given the economic environment related to COVID, APRA also has intensified supervision of all institutions’ funding and liquidity positions.
Over recent months, APRA and ASIC have had regular dialogue, including at senior levels, and we continue to collaborate on this matter.
Specifically, I would like to emphasise that in relation to ME Bank’s remediation program it was not APRA’s role to review or endorse the remediation program. In line with our mandate, and to ensure we do not duplicate the work of ASIC, we do not oversee customer remediation matters.
However, this issue has raised our focus on ME Bank’s risk and governance frameworks, and APRA will continue regular and ongoing engagements with ME Bank, including at senior levels, as part of our supervisory program of work.
Working in collaboration with ASIC, we will continue to closely monitor this matter.
As per our previous correspondence, I attach to this statement a chronology of key engagement with ME Bank in relation to the remediation work being undertaken by ME Bank.
16 December 2019
ME Bank provided APRA a copy of a letter to ASIC dated 10 December 2019.
APRA understood this letter to ASIC was not a formal report of a breach and discussed the matter with ME Bank’s management as part of a subsequent regular supervisory engagement.
3 February 2020
Further discussion regarding the redraw matter between APRA and ME Bank as part of a regular supervisory engagement.
30 April 2020
ME Bank provided APRA a copy of a letter to ASIC dated 16 April 2020. This letter outlined ME Bank’s customer remediation approach, which it was discussing with ASIC.
4 May 2020
APRA met with ME Bank following the changes made to customers’ redraw facilities.
4-19 May 2020
Daily updates from ME Bank related to APRA’s assessment of potential prudential risks.
5 May 2020
APRA met with ME Bank’s Chief Executive Officer.
8 May 2020
APRA met with ME Bank as part of regular supervisory engagement, which included discussion on the redraw matter.
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The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $7.9 trillion in assets for Australian depositors, policyholders and superannuation fund members.