Announced in February this year, the review was to consider the capabilities of the regulation authority in its capability to deliver upon its mandate under the act, its ability to respond to a complex environment and how it could be enhanced for the future.
“The main conclusion of this review is that APRA’s internal culture and regulatory approach need to change … cultural change is necessary,” the executive summary found.
The review commended APRA for its work, saying that the Australia financial institution had had very few failures since the authority's inception but the damaging revelation from the royal commission brought into question the regulator's ability.
“Trust in the financial system and its regulators has diminished. Community expectations about the role of regulators have been heightened,” it said.
The review has made 19 recommendations directed at APRA, which the authority has indicated it will all support.
“APRA is committed to ensuring it is fit for the future and the panel’s recommendations support this,” said APRA chair Wayne Byres.
“APRA will continue to focus on its primary responsibility to protect the financial wellbeing of the Australian community as it implements the changes that have been recommended and those APRA already has underway.”
APRA noted that many of these were an endorsement of its current corporate plan and as such APRA already had actions to address them.
Among the recommendations by the review were that APRA change its internal norms by departing from closed-door approach, reinvigorate its approach to collaboration and take a more forceful approach in its public communications.
“More effective communication of its priorities and mandate will provide a clear signal to the market as to what the regulator wants, making it more transparent and more effective in its supervision of the financial sector,” said the review.
The review recommended that that the authority consider a new structure as a way to develop a more open-minded culture, one that was adaptable to change and supportive of engagement.
“A change in organisational structure is more likely to reinforce the required behavioural changes,” it said.
One such way to do that was to replace its divisions with separate banking, insurance and superannuation divisions that would increase focus and accountability for dealing with industry-specific issues.
Particularly around superannuation the review found that APRA had placed more emphasis on member outcomes but was slow to broaden.
“APRA needs to lift its effort on superannuation and shift its thinking and focus by developing its policy and supervision framework and by building its skills and resources dedicated to the sector. This would be assisted by changes to APRA’s existing structure,” it said.
But the recommendation to create a new super division headed by an executive general manager, supported by APRA, has been met with hesitation by ASFA.
“The recommendations to raise capability and deploy a more effective operating model for APRA have considerable merit but the superannuation specific recommendations need careful consideration,” said ASFA chief executive Dr Martin Fahy.
Five recommendations were also made towards the government, which the Treasury said it would work with APRA in its consideration.
“The government is confident that the response it has announced today, alongside action from APRA, will ensure that APRA is in a position to effectively respond to these new challenges and deliver on its mandate,” said Treasurer Josh Frydenberg.