The prudential regulator has outlined its approach to implementing solutions to the deficiencies identified in the banking royal commission with respect to authorised deposit-taking institutions’ (ADIs) management of their product responsibilities.
Recommendation 1.17 of the royal commission final report recommended that the Australian Prudential Regulation Authority (APRA) determine an end-to-end product responsibility for each ADI subject to BEAR.
APRA has now released its proposal seeking to drive improvement in customer outcomes by requiring institutions to identify and register an accountable person to hold end-to-end product responsibility for each product that the ADI offers to its customers.
“APRA does not consider it appropriate that the chief executive officer of an ADI holds the end-to-end accountability for all of its products, except for smaller, less complex ADIs,” said APRA.
There are four key considerations by APRA in implementing product responsibility; the first of which is scope.
A broad interpretation of what is in scope was suggested by APRA, with accountability to not just be in all steps of design and delivery of customer products, but also extending to issues of customer remediation, linkages to IT and data and incentive arrangements.
This would take it beyond consideration of processing and administrative errors and include expansion to customer experiences and outcomes.
The second consideration was coverage, with APRA proposing a single-point accountability for a given product would be required for all products offered, rather than just retail products.
This means it would include but not be limited to products, services, white label and other-branded products.
The third was for APRA to introduce a legislative instrument that would be added to the Banking Act that would reflect who is the responsible person for products and its subsidiaries.
APRA proposes to include the following paragraph: “A particular responsibility includes senior executive responsibility for end-to-end product management of a product or product group offered by the ADI or the relevant group of bodies corporate that is constituted by the ADI and its subsidiaries, including but not limiting to all steps in the design, delivery, maintenance and any necessary remediation of customers in respect of any such product or product group.”
The last proposal by APRA was for joint accountability to reinforce clear points of accountability for instances where more than one accountable person was identified.
APRA proposed that joint accountability be applied to ensure no gaps or dilution and all relevant accountable persons would be equally accountable under the proposal.
APRA is currently seeking input on any area that may impact the core objective of ADIs achieving heightened and clarified end-to-end accountability.
The proposal is not directly relevant to foreign ADIs, but APRA expects all foreign ADIs to consider how they will apply it to their Australian operations.
