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APRA mute on lack of action
The Australian 12:00am January 11, 2019
Ben Butler
The prudential regulator has failed to respond to criticism by the Productivity Commission that it has been “missing in action” by not taking action against superannuation trustees who rip off members.
Australian Prudential Regulation Authority member Helen Rowell yesterday failed to address calls in a blockbuster Productivity Commission report for the regulator to ditch its preference for backroom deals in favour of taking public legal action in order to raise standards across the scandal-ridden super sector.
However, Mrs Rowell, APRA’s super tsar, said the regulator welcomed the Productivity Commission’s calls for a capability review — an inquiry by external experts into the agency’s ability to enforce the laws for which it is responsible.
A spokesman for the Australian Securities & Investments Commission, which regulates some parts of the super industry and was also criticised by the Productivity Commission, said it welcomed the report, “which is a significant piece of work and will consider its findings and recommendations”.
Following a series of finance sector scandals that exposed ASIC as overly reluctant to act against wrongdoing, ASIC was subjected to a capability review in 2015 by a panel that included then productivity commissioner Karen Chester, who spearheaded the Productivity Commission review of super and is now herself an ASIC commissioner.
However, the way APRA discharges its responsibilities as a regulator of the superannuation system has largely escaped sustained public examination until last year, when its failure to prosecute or take action against superannuation trustees for breaches of duty towards members was exposed at the financial services royal commission.
The Productivity Commission said Mrs Rowell, who was grilled over APRA’s unwillingness to take legal action at royal commission hearings, yesterday said the regulator was stepping up oversight of the sector.
“APRA has intensified our scrutiny of board governance practices and conflicts of interest management,” Mrs Rowell said.
“Further, we have significantly stepped up our efforts to improve co-ordination with other regulators, including ASIC, and are well progressed with a review of APRA’s enforcement strategy.
“APRA has previously indicated its willingness to take part in a capability review led by appropriately experienced and qualified experts.”
She said she was pleased the Productivity Commission had endorsed APRA’s call for increased powers, including the ability to force poor-performing “mutt” funds to wind up or merge, and a recommendation for a joint taskforce between ASIC and APRA to prepare a report on the state of the sector every two years.
“APRA is committed to enhancing the focus of Australia’s superannuation sector on delivering optimum member outcomes,” she said.
“New and enhanced prudential requirements we announced last month included strengthened member outcomes assessment obligations for all superannuation products, and APRA has continued its progress in getting trustees to take action on underperforming funds.”
Josh Frydenberg said the government would respond to the report, and the final report of the royal commission, which is due to be handed to government on February 1, before a federal election that must be held by May 18.
The Treasurer told the ABC’s Radio National the government supported increased powers for the regulator.
