APRA announced its goals for the year ahead in a pair of reports published on Wednesday. Chief among those goals was the transformation of governance, culture, remuneration and accountability (GCRA) across all APRA-regulated institutions.
“As banks make progress in their remediation plans to address weaknesses identified in their risk governance self-assessments conducted in the second half of 2018, supervisors will be scrutinising the impact and effectiveness of these actions to assess whether they are delivering the intended improvement in oversight and controls,” the report reads.
“More forceful supervisory actions will be considered where sufficient progress has not been made.”
The report didn’t elaborate on what those supervisory actions could be, but last year the regulator floated the idea of sitting in on board meetings – something that Treasurer Josh Frydenberg quickly vetoed. However, ASIC has already made similar moves, embedding an organisational psychologist into the board room’s of twenty of Australia’s top companies.
APRA will also conduct an assessment of how the BEAR has been implemented by the major banks and whether it has been used to enhance accountability and consequence management.
“A ‘deep dive’ review of the major banks’ compliance functions is also being undertaken,” the report reads.
The regulator flexed its muscles at the height of the Westpac scandal by announcing that it would be investigating whether the bank’s c-suite personnel breached the BEAR in relation to its 23 million violations of anti-money laundering legislation and demanding that the bank add an extra $500 million to its operational risk capital.
The BEAR will also be expanded across financial services to include insurance and superannuation, APRA Deputy Chair Helen Rowell told the Investment Magazine’s Chair Forum on Thursday.
“The design of the new Financial Accountability Regime (FAR) is ultimately a Government decision, however both APRA and the Australian Securities and Investments Commission (ASIC) have been working closely with Treasury on its development, given both agencies’ role in overseeing the new regime,” Ms Rowell said.
“Regardless of which category you may fall into, all RSE licensees should be preparing now because the extended accountability regime will be on the horizon before you know it. At the bare minimum, a prudent RSE licensee would already be considering its internal accountability structure, and who is responsible for what.”
