The response from APRA’s submission to the Hayne royal commission interim report said that there is a role for APRA and ASIC in setting and enforcing culture but ultimately change could only come from the industry.
“Ultimately behavioural change will only occur if boards take ownership for the actions of their organisations and the consequences of those actions,” it read.
“Solutions to past problems must involve industry taking more responsibility, not less, for maintaining appropriate standards of conduct and guarding against misconduct.”
APRA identified three questions posed by the commission with respect to the regulators and their responses to misconduct, conduct and compliance risk, and regulatory architecture.
It said in the submission that, in relation to misconduct, the regulator responded by focusing on strengthening the governance and practices of entities and said its responses were appropriate.
“APRA believes its response to misconduct and misconduct risk has been broadly appropriate given its core prudential mandate and risk-focused approach,” it said.
The submission said that APRA agreed that governance, culture and incentives drove conduct and that more action could be taken.
“APRA has committed to continue to facilitate the improvement of accountability, governance and risk culture within financial institutions,” it said.
APRA agreed with the interim report that regulation needed to focus more on misconduct and APRA would examine that.
“The evidence before the royal commission highlights the need for APRA to examine the means by which it can more actively contribute to a regulatory framework that limits the potential for misconduct to occur in the future,” it said.
The authority disagreed with the commission’s call for simplification of regulation arguing that simplifying the structure would be no small task as it was impossible to start with a clean slate.
“APRA does not see simplification of laws and regulations as in itself likely to drive materially better practices,” it said.
APRA maintained that the current structure of regulation and responsible regulators should stay the same, with APRA focusing on safety and soundness while ASIC focuses on consumer protection.
“The regulatory architecture which emanates from this structure may at times be complex, but given the nature of the financial services sector, some degree of complexity is inevitable,” it said.
APRA conceded that there was no easy fix to misconduct in the industry and the way forward would likely involve a range of measures.
The authority identified some of those measures as:
- institutions being committed to incentive structures that reward outcomes for meeting broader community expectations as much as they do financial targets;
- a clearer regulatory and institutional focus on individual accountability, through incentive structures and appropriate responses to poor outcomes;
- regulatory powers and resources dedicated to detecting misconduct and taking action, including formal enforcement where appropriate; and
- stronger industry codes, self-regulation and dispute resolution mechanisms.
APRA said it would work with the commission and government to strengthen standards and guidance for governance and risk management.
“APRA intends to strengthen the prudential standards to focus not only on policies and frameworks, but their implementation in practice and the outcomes achieved,” it said.
I bet when some advisers heard the words “self regulation” many choked on their wheatbixs. By reading comments here seems like the relationship between products and distribution salesmen is well and truly alive in 2018.
2008 Financial Planner said….”Self regulation…..what ? go out and spend $500 plus a weeks time getting a Diploma of Insurance to prevent over regulation and Government intervention….you’ve got to be kidding.”
2009 FPA Member said..”I’m happy for my FPA to get kickbacks from CBA/AMP and the perception this creates with legislators etc…I do like Julia Gilllard thinking the FPA represents AMP… what is FoFo or FoFa anyway?”
By the sounds of these winging comments here, Trying to get planners to lift professionalism is like herding cats. More Government intervention is obviously needed.
Is APRA on the same planet as the rest of us. These guys are been in their own world since 2004 when they lost a lot of staff after Treasurer Costello forced them to move HQ to Sydney.
In 1977, the then Insurance and Superannuation Commission(ISC) chairman, Tig Melville, introduced regular actuarial reports for capital adequacy and solvency, against stiff resistance from insurers. Those reports could predict problems. The ISC investigated any revealed problems and instituted solutions, without fuss and more importantly without reducing public confidence in the insurance industry in Australia.
My understanding is that if those “sign offs” are still occurring as originally intended, they may be totally meaningless as APRA is not acting quickly if there is a problem. For example, how can APRA maintain that those insurers with very large exposure to group insurance are still strong and not living in a fool’s paradise.
How long is it since APRA challenged an insurer as to the long term pricing of an income protection contract. Why hasn’t APRA more closely supervised the calculation of level premiums in what has been a long term low interest market, resulting in some insurers increasing level premiums by nearly 1/3. How’s that in consumer interests?
How is it also in consumer interests to allow an insurer to direct market so-called life insurance products which, bathing in the severity of a pre-existing condition clause, are no more than glorified and expensive accidental death policies
In my view the worst thing the Costello did with FSR was to insist that the ACCC hand back its powers on the sales methods for life insurance across to ASIC. That’s worked out real well!
You could also argue the now declining property boom, driven by poor lending practices, was partly attributed to APRA. APRA are in no situation to chastise the other operators in the life insurance industry. Bah humbug
Agree but what about Chairmen being appointed with questionable track records. How can this be allowed?
The regulator is simply not ” prudential ” hence the problems of the past . the industry is well and truelly overburdened with regulatory crap and is becoming unworkable . Cost of Advice I predict will double in 3 years time !!! You can’t get a degree of honesty so there will always be crooks in the System , yes even degree qualified accountants and lawyers !! Wait for Billy shorten to get in , can advisers unless they have special rules for industry funds advisers .
Ain’t that just grand, do these Government bodies seriously think they have given “broadly Appropriate responses” to the massive and long term Instituional & Executive misconduct.
Wow we have far bigger problems than have already emerged from the RC.
What a complete and utter JOKE APRA and ASIC are !!!
Ain’t that just grand, do these Government bodies seriously think they have given “broadly Appropriate responses” to the massive and long term Instituional & Executive misconduct.
Wow we have far bigger problems than have already emerged from the RC.
What a complete and utter JOKE APRA and ASIC are !!!