Obviously enough. Via the ABC:
An independent review is urging the overhaul of the Australian Prudential Regulation Authority (APRA), slamming it for a poor culture and variable leadership.
In a proposed shake-up of the often secretive regulator, a three member panel chaired by former ACCC chairman Graeme Samuel said change was needed.
“APRA appears to have developed a culture that is unwilling to challenge itself, slow to respond and tentative in addressing issues that do not entail traditional financial risks,” the review said.
“In combination with APRA’s organisational structure, these factors limit its ability to deliver on the breadth of its mandate and adapt to new challenges.”
The panel made 24 recommendations, with 19 directed to APRA and the remaining five directed to the Federal Government.
The capability review into APRA was initiated as a result of a recommendation from the Hayne Royal Commission final report released in February, which was also critical of the Australian Securities and Investments Commission (ASIC) for failing to detect and eliminate misconduct in financial services.
While the panel described APRA as an “impressive and forceful regulator”, it observed that its tolerance for operating beyond quantifiable financial risks had been low.
It also urged change in the way APRA was run, noting a “variability in its leadership capability” at all management levels and the need for cultural change “that fosters internal debate and contestability”.
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APRA staff interviewed for the review said decision-making was slow “with issues being taken through various committees and sometimes ‘parked’ for long periods, before decisions are made”.
The report criticised APRA’s preference to keep a low profile and dealing with regulated entities “behind the scenes”.
“The panel believes that this limits its impact and authority. APRA needs to shift the dial towards a more strategic and forceful use of communication to ensure that it maximises its impact with regulated entities,” the report said.
In other key recommendations, the panel urged:
- A review of current penalties available to APRA to determine if they are adequate
- Building on the Commonwealth Bank inquiry into culture, accountability and governance with a view to holding several similar inquiries over the next two years
- The creation of a new superannuation division to oversee the system for all members
- That APRA has sufficient powers and flexibility to prevent inappropriate directors and senior executives from being appointed or re-appointed to regulated entities
- APRA should take a more transparent and assertive role in articulating the objectives of its macro-prudential policies, the design of the instruments chosen and assessment of its impacts, including on the broader areas of its mandate
- APRA should change its existing internal norms that create a low appetite for transparent supervisory challenge and enforcement by: departing from its behind closed doors approach with regulated entities and adopting a stronger approach towards recalcitrant institutions
How can the guy that led APRA into this review and its epic failures now be tasked with implementing it? That is to destroy the core principle of greater accountability outlined by the review before reform is even started. Wayne Byers has to go. Indeed, only by resigning can he illustrate he has what it takes to stay.
An outsider is needed to sweep the place clean. I’d suggest some eminent RBNZ alumnus.
Many of the recommendations are good and make sense but this review is itself too limited. In today’s world, having prudential and monetary regulation separate makes no sense and is dangerous. It opens a gulf of diffused responsibility that guarantees poor inter-agency collaboration, overly slow macroprudential and the very secrecy that this review wants to see eliminated.
Where is the review of the Lunatic RBA, how it failed to collaborate effectively with APRA, and why the two should be slammed back together under entirely new leadership?