APRA threatens alternative enforcement for Hayne referrals

Australian Financial Review Apr 11, 2019 4.04pm

Misa Han


The prudential regulator says it may have to pursue "other avenues" to take enforcement action against the entities singled out by the Hayne royal commission, because the usual sanctions such as civil and criminal penalties are not available.

In a written statement to the Senate economics legislation committee on Thursday, APRA chairman Wayne Byres said implementing the Hayne royal commission recommendations and referrals was a "high priority" for the regulator.

"We continue to gather evidence on each of the possible enforcement matters referred to APRA, and expect to be able to make an assessment on the merits of further action in the coming months," he said.

"However, as I noted last time, none of the potential breaches of the law or prudential standards that have been referred to APRA carry civil or criminal penalty provisions directly, although other avenues to impose sanctions may be available depending on the specific circumstances."

The hearing did not go ahead as the federal election was called on Thursday morning.

In the banking royal commission final report, commissioner Kenneth Hayne made six referrals to the Australian Prudential Regulation Authority, four of which were prompted by potential breaches of the Superannuation Industry (Supervision) Act.

Those companies referred by Mr Hayne to APRA for potential breaches of superannuation laws were National Australia Bank, AMP, IOOF and Suncorp.

APRA has the power to cancel a registrable superannuation entity (RSE) licence (which is required to run a super fund), seek disqualification of an individual or suspend or remove the trustee for breaches of superannuation laws.

However, the prudential regulator in the past rarely used these powers.

Action against IOOF

In December, APRA shocked the market by seeking to disqualify the IOOF chairman, chief executive, chief financial officer, general counsel and company secretary in the Federal Court.

This ended with chief executive Chris Kelaher leaving the wealth giant with $1.3 million after 10 years in the role. IOOF and the senior leaders are still defending the court action.

APRA also has the power to direct a trustee of a super fund to comply with licence conditions, require production of documents or commence a formal investigation for breaches of superannuation laws.

Mr Byres said in the statement APRA's additional funding of $150 million over four years, announced in the federal budget early this month, will be used to improve its supervisory framework and extend the banking executive accountability regime (BEAR) to all APRA-regulated entities, including insurers and superannuation funds.

He said over the next year, APRA would improve the consistency of its superannuation data collection and make more data publicly available so super fund members could make better decisions about choosing funds.

Since last week, APRA has had new powers, including the power to impose civil penalties on trustees and their directors for breaching their obligations to members.

APRA also now has the power to refuse permission for a change in ownership of an RSE licensee, and to direct an individual to give up control of an RSE licensee.

However, APRA will not be able to use these powers for the matters referred by Mr Hayne because the powers do not apply retrospectively.

Housing markets weak

On housing, Mr Byres said the markets remained weak "but the adjustment in housing prices and activity remains orderly and does not raise material financial stability concerns".

He said the improvement in banks' lending standards meant households and lenders were "generally less vulnerable to falling housing prices than in the past".