Commissioner Kenneth Hayne said he began his assessment of ASIC and APRA from the premise that no new layer of law or regulation should be added unless there is clearly identified advantage to be gained by doing that.
In addition, he said he began from the further premise that very simple ideas must inform the conduct of financial services entities.
Hence, the commission said the first question to be asked and answered is whether the law governing financial services entities and their conduct is too complicated, namely:
• Whether it impedes effective conduct risk management?
• Whether it impedes effective regulatory enforcement?
With regards to ASIC and APRA, Commissioner Hayne considered whether there should be annual reviews of the regulators’ performance against their mandates.
The report asked whether ASIC’s and APRA’s enforcement and regulatory practices were satisfactory and, if not, how.
On ASIC, he asked whether its remit was too large and, if it were to be reduced, who would take over those parts of the remit that are detached. If detachment is needed, there would need to be justification as to why it would be better.
Commissioner Hayne then noted whether ASIC’s enforcement priorities should change. In particular, he noted that, if there is a reasonable prospect of proving contravention, whether ASIC should institute proceedings unless it determines it is in the public interest not to do so.
With regards to APRA, questions were raised around whether the conduct identified and criticised calls for reconsideration of APRA’s prudential standards on governance.
Then the report noted that, having examined the governance, culture and accountability within the CBA group, what steps APRA can take in relation to those issues in other financial services entities.
Lastly, Commissioner Hayne asked whether industry codes relating to the provision of financial services, such as the 2019 Banking Code of Practice, be recognised and applied by legislation like PART IVB of the Competition and Consumer Act 2010 (Cth).
ASIC chair James Shipton welcomed the interim report and acknowledged the commission’s work to date.
“ASIC notes the report’s serious and important observations of ASIC’s role as a regulator,” Mr Shipton said.
“ASIC will carefully consider these observations, as well as the broader findings in the report, and will respond fully in its submission by 26 October 2018.
“ASIC will continue to assist the royal commission and to work with the government, the parliament and other regulators to build a stronger legislative, enforcement and regulatory framework with tougher penalties.”
