APRA’s chairman has said that the financial system in Australia is fundamentally sound but he was willing to work on improvements.
APRA’s chairman Wayne Byres made the statements in front of the Senate Economics Legislation Committee where he discussed APRA’s role in the industry.
Mr Byres said the industry knew it needed to lift its game in certain areas, but it came at these improvements from a position of strength.
“There are areas where the financial sector must lift its game – particularly in relation to operational and cultural improvements – we are thankfully working on these from a position of financial strength,” he said.
Mr Bryes said given the current political climate in the world it was important to reinforce the strength of the system.
“It is important, particularly in the current environment of volatility, that we protect and, where possible, reinforce the soundness and resilience of the financial system in anticipation of future adversity, whenever that may occur,” he said.
Mr Bryes said the financial system strength did not make the royal commission any less confronting or uncomfortable for the industry.
“Clearly, there have been too many instances of behaviour that do not meet community expectations, and in some cases, the law. The Commission has identified failings that ultimately will need to be addressed by institutions, regulators and the Parliament,” he said.
Mr Bryes said APRA would focus on two key themes moving forward, being remuneration and enforcement.
“The commission has rightly highlighted the potential for these – if not well designed – to incentivise poor consumer outcomes.
“The commission has suggested a broader examination of the issue is needed, and APRA and ASIC will need to work together to consider how this can best be done without exacerbating existing concerns that the responsibilities between the two agencies are becoming blurred,” he said.
Mr Bryes said that APRA would be working on improvements to its enforcement actions and new deputy chair John Lonsdale would be a key part of that.
“With the benefit of John’s fresh perspective, we are re-examining how our enforcement philosophy, our governance structures for enforcement decisions, and our resourcing for enforcement activity can be improved.
“This will take account of not only the lessons from the royal commission, but also the need for new processes and structures to be developed for the BEAR,” he said.
Mr Bryes said that APRA had been busy behind the scenes to help ADIs implement BEAR and had also made other changes including updated prudential standards and guides and new requirements for life insurers.
“APRA’s primary objective in undertaking all these actions is to continually build strength in the financial system for the benefit of depositors, policyholders and superannuation members,” he said.