Royal Commission report demands new oversight body for ASIC, APRA
Treasurer Josh Frydenberg has confirmed the Federal Government will “take action” on all 76 recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services, which was released today.
Among the recommendations tabled in the final report is the creation of a new oversight body for the industry's chief regulators – ASIC and APRA.
Comprised of a three-member board, the report said the new oversight authority should be tasked with “[assessing] the effectiveness of each regulator in discharging its functions and meeting its statutory objects.”
Frydenberg acknowledged the “timidity” of the corporate regulators in tackling systemic misconduct within the sector.
While the report ruled out any major shake-up of the “twin-peaks” model of regulatory governance, the Treasurer said he would work with both ASIC and APRA to ensure “they are fully provisioned” to implement the proposals of the Commission.
Commissioner Kenneth Hayne, who chaired the inquiry, was scathing of the regulators’ obsequious dealings with the companies they were tasked with regulating, referring to them as little more than “clients" of the industry watchdogs.
The ‘toothless tiger’ approach to regulation – opting for negotiated settlements over punitive action – Hayne believed offered little deterrence against misconduct and, what is more, compromised the government-mandated objectives of the regulators to operate in the public interest.
“All of these considerations show that improving compliance with financial services laws cannot be achieved by focusing only on negotiation and persuasion,” the report added.
The report also advised government to extend a broader remit to each regulator to tackle a corporate structure that rewards unethical and potentially illegal conduct.
“Supervision must extend beyond financial risk to non-financial risk and that requires attention to culture, governance and remuneration,” the report said.
“Failings of organisational culture, governance arrangements and remuneration systems lie at the heart of much of the misconduct examined in this Commission.”