Anyone expecting a rock-solid regulator to keep the superannuation industry in line would have been appalled by APRA’s performance at the royal commission last week.
Watching someone admit their mistakes can be a pretty powerful elixir to the poison of human resentment. It’s safe to say that there is a fair amount of anger being directed at the big banks, insurers and super funds right now.
For those working in these industries, as well as a few consumers, some of that disdain is also being directed towards the regulators.
When someone sitting in the witness box at the Hayne royal commission throws up their hands and says ‘Yep, we stuffed this one up’ it takes bite out our bitterness; they become human, capable of redemption.
My respect for ASIC deputy chair Peter Kell was boosted when he told the commission that the decision to grandfather adviser commissions post FOFA was a mistake.
Kell admitted ASIC should have given more thought to the consequences of the grandfathering provisions: “Leaving aside the legal side, grandfathering – the entire provision – is not in the interests of consumers,” he said.
On the other hand, shirking responsibility and taking a laissez-fair approach to potentially criminal corporate behaviour is a tough pill to swallow. Like when APRA deputy chair Helen Rowell was asked about the regulator’s powers on Friday morning.
Counsel assisting Michael Hodge QC grilled Ms Rowell about APRA’s knack for regulating “behind closed doors”, something flagged by the recent Productivity Commission report. The gist of it is that by not revealing publicly what action it is taking to regulate the industry, rogue operators will continue to flourish, safe in the knowledge that they won’t attract any negative press.
Ms Rowell told the commission in a statement that the main impediments to disqualifying someone or taking a company to court are the time and cost of gathering evidence. This could easily be seen as a government agency putting its hand out for more resources. To me, it smacks of a lazy regulator kicking the can down the road.
APRA is clearly passing the buck onto ASIC when it comes to the serious stuff. That was made clear when Ms Rowell told the Commission that APRA would wait for ASIC to finish its investigation of the ‘fees for no service’ debacle before deciding what to do.
It’s also clear the two regulators aren’t communicating too effectively. When Mr Hodge asked whether APRA had received any suggestion from ASIC that ASIC will commence public enforcement action in relation to ‘fees for no service’, she replied: “I don't know the answer to that question.”
For the deputy chair of the prudential regulator to not be across this seems rather frightening, given the magnitude of the issue at hand. One would think that ‘fees for no service’ would be high on APRA’s agenda. At least a memo, an update, from ASIC, surely?
APRA performed poorly under pressure, which presents significant problems for the stability of the financial services community.
When Treasurer Scott Morrison announced the 2017 federal budget last May, there was plenty of fanfare when a raft of measures was revealed, designed to drive a more accountable financial system: the Banking Executive Accountability Regime (BEAR).
Under the regime, APRA will have power to disqualify and deregister senior executives and directors who have failed to meet certain expectations. This could be a challenge for a regulator that feels taking such action is expensive and takes too darn long.
If any positive change is to occur following the royal commission, APRA will need to come out from behind closed doors and show its teeth.
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