Finance Finance News Financial watchdog needs shake-up: Review

Financial watchdog needs shake-up: Review

apra review
A post-banking royal commission review of APRA has recommended a host of changes Photo: Getty
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An independent review has slammed the banking and financial regulator’s secretive approach, calling for a major shake-up and a new division focused on superannuation.

The review of the Australian Prudential Regulation Authority, led by former consumer watchdog Graeme Samuel, was initiated after its performance was scrutinised in the banking royal commission.

The report slammed the regulator for its low profile and slow decision-making, and called for an overhaul of its organisational structure.

“There are good reasons for a prudential regulator to be discreet, particularly in cases of acute financial stress,” the report said.

“However, APRA needs to shift the dial towards a more strategic and forceful use of communication to ensure that it maximises its impact with regulated entities.”

The main conclusion of the review is that APRA’s internal culture and regulatory approach need to change.

“APRA appears to have developed a culture that is unwilling to challenge itself, slow to respond and tentative in addressing issues that do not entail traditional financial risks.”

The report also said a division entirely focused on superannuation was needed, to see how the system performed for its members.

All of the 24 recommendations have been accepted, including 19 for the regulator and five directed towards government.

Recommendations for the government include reviewing the adequacy of APRA’s penalties and giving it the power to appoint someone to undertake reviews.

Treasurer Josh Frydenberg said he was confident APRA would evolve to perform effectively.

“The review found that APRA is an ‘impressive and forceful’ regulator in matters of traditional financial risk,” he said on Wednesday.

“However, the review has also identified important changes to ensure that APRA is well positioned to respond to an environment of growing complexity and emerging risks for APRA’s regulated sectors.”

Shadow treasurer Jim Chalmers said the recommendations were a step in the right direction.

“The report makes it clear that the government’s cuts to APRA funding have hampered the regulator’s ability to police the sector,” he said.

“We will work through the detail of the report and its recommendations and come to a considered view in due course.”

Dr Chalmers said more needed to be done across the board to restore confidence in the finance sector.