Given the important questions that have been raised by the Hayne royal commission, the extension of Australian Prudential Regulatory Authority Wayne Byres is sending a message that is both poorly timed and discordant. The report only covered the first two-thirds of the commission's hearings, and it was stated that what it didn't cover was superannuation and the APRA's role in regulating the sector was examined.
In the public's understanding in what is likely to become an essential moment of how regulators in Australia work, APRA’s Helen Rowell deputy chairman agreed with the characterization of APRA doing its work behind closed doors.
APRA's approach is to spot problems and review matters and then work with the firm involved to try to understand what went wrong. APRA might appoint and skilled to do a further review, in some cases write an aggressive letter and in the most severe cases even take legal action.
Against the director of the collapsed firm Trio Capital, APRA has only taken legal action once since 2008. In the last decade in relation to superannuation, Rowell also said APRA has never taken out an enforceable undertaking outside the limited scope of that Trio matter. Its broader role of supervising, APRA's role in super is slightly more specific. Insurance and superannuation, institutions across banking and promoting financial system stability in Australia.
It seems likely that his final report will have some pointed recommendations about APRA's own conduct, given Hayne's interim report already lashed APRA for never taking anyone to court, and its implementation approach. Public's faith in financial institutions and regulators has been shaken by the royal commission, and it would have been ideal to wait for Hayne's final report before making any call on the future of Byres.
Being run by Byres new deputy John Londsdale APRA itself has launched a review of its enforcement approach. Before making his call on Byres future, Treasurer Josh Frydenberg not have liked to see the results of this piece of internal work.
Although there is still much to play out on this front, the way APRA has guided the banking system through an overheated property market looks reasonably good, Byres' international reputation is unquestioned. During a period where a cultural malaise, but it is hard to ignore the fact that Byres and his team have been in place.
It's not easy to point to what APRA did between Byres' appointment in 2014 and 2018, and because of the regulator's behind-closed-doors approach to stop that systemic problem taking hold.
Perhaps some reflection about the problems at CBA said, about APRA's supervision during the five-year period was also warranted but CBA's conduct was obviously the focus. As they await the outcome of APRA's internal enforcement review and the royal commission's final report, this only reinforces why a period of deep reflection on the role of regulators is warranted.
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