The Australian Prudential Regulation Authority (APRA) has published its new Enforcement Approach which sets out how APRA will approach the use of its enforcement powers to prevent and address serious prudential risks and to hold entities and individuals to account.
The new Enforcement Approach is based on the results of its Enforcement Review which recommended:
• APRA adopting a “constructively tough” appetite to enforcement and setting it out in a board-endorsed enforcement strategy document;
• ensuring APRA supervisors are supported and empowered to hold institutions and individuals to account, and strengthening governance of enforcement-related decisions;
• combining APRA’s enforcement, investigation and legal experts in one strengthened support team, and ensuring resources are available to support the pursuit of enforcement action where appropriate; and
• strengthening cooperation on enforcement matters with the Australian Securities and Investments Commission (ASIC).
The Enforcement Review found APRA had, on the whole, performed well in its primary role of protecting the soundness and stability of institutions. But APRA could achieve better outcomes in the future by taking stronger action earlier where entities were not cooperative or open, and by being more willing to set public examples.
A separate Panel is currently undertaking a Capability Review of APRA.
APRA says: “the effectiveness of prudential supervision depends on regulated parties knowing that APRA will take firm action where prudential risks are not being properly addressed. Enforcement is therefore an integral part of APRA’s supervisory toolkit. In support of this, APRA has a number of formal legal powers which range from simple information gathering powers to more coercive and intrusive tools that enable APRA to investigate, direct entities to take action, impose license conditions, ban individuals, and refer matters for civil or criminal court action. APRA may select a combination of tools from anywhere along the spectrum to suit the circumstances with which it is dealing.”
APRA will consider enforcement action where an entity or individual has not:
• adequately prevented or addressed prudential risks; or
• conducted business with honesty and integrity, or with due skill, care and diligence; or
• dealt with APRA in an open, cooperative and constructive way; and in such cases:
• there has been an adverse impact on financial soundness, stability or, in the case of superannuation, the interests of members; or
• the risk or behaviour could have, or could have had, an adverse impact on financial soundness, stability or, in the case of superannuation, the interests of members. For example, actions that do not promote prudent risk management; or
• APRA’s ability to make an accurate and timely assessment of an entity’s prudential risk profile has been, could be or could have been impeded.