APRA has warned super funds to pick up their act as industry bodies rally against the new Financial Accountability Regime (FAR).
In a speech to the Australian Institute of Company Directors (titled “A is for accountability”) APRA deputy chair Helen Rowell said that super funds “are not immune from risks and poor outcomes” but noted that more accountability – and more regulation – wasn’t a popular idea within the industry.
“The decision to expand the BEAR to other areas of the financial sector hasn’t been universally welcomed by some in the business community,” Ms Rowell said.
“Primarily, the arguments for this centre on red tape and increased regulatory burden, and potentially deterring talent from taking up roles in the industry. Others have argued that the types of misconduct seen in banking aren’t nearly so prevalent elsewhere in the financial sector and hence strengthened accountability requirements are not needed.”
Ms Rowell said that while the royal commission had uncovered a number of issues in superannuation that required action, improving accountability was “simply good business practice”.
“The FAR proposals provide an opportunity for entities to be pre-emptive, and establish clear lines of accountability to potentially head off future problems,” Ms Rowell said.
“Doing so will ensure that if and when significant failings happen, the entity itself can quickly and effectively enforce appropriate accountability.”
But the Association of Superannuation Funds of Australia has warned that the FAR – specifically, the penalties that come with it – will have an onerous effect on the ability of super funds to attract new workers.
“While having individual consequences for breaches of FAR could encourage individual accountability, it may have a significant impact on the ability of APRA-regulated entities to attract talent,” ASFA said in a submission to the Treasury on the proposed legislation.
“This will include talent from entities that sit outside the regulatory remit of APRA, as well as global talent that may find the possible imposition of penalties, as well as the restrictions around the awarding of remuneration, as reasons not to take a role within the Australian financial services sector.”
The implementation of the FAR has also been criticised by some consumer groups for not doing enough to protect customers.
“The federal government promised action to hold executives accountable after the royal commission, but the proposed reforms are missing requirements for fair treatment of customers,” said CHOICE CEO Alan Kirkland.
“Fairness is missing from the government’s proposed executive accountability reforms. Executives will be obliged to ensure the prudential standing of the business but there is no mention of treating customers fairly.
“A well-designed FAR regime will be the defining legacy of the banking royal commission. Failure to implement this effectively, due to industry lobbying and pressure, would be a clear violation of commissioner Hayne’s vision.”