PRESENTER:
Jane Hume is talking right now. She is a fairly newly minted minister and, of course, she's talking about the APRA report today that's been handed down, a fairly scathing one of the banking regulator, let's have a listen in.
HUME:
Agreed to take action on the five recommendations that apply to the Government also. I'm happy to take questions.
JOURNALIST:
So, Senator (inaudible) says the APRA chair must go, do you agree?
HUME:
Wayne Byers has been a very effective chair of APRA and the Government believes that with the careful and prompt implementation of the recommendations of the APRA capability review, that APRA can continue to be an effective regulator in the future.
JOURNALIST:
So then APRA can be successful (inaudible)?
HUME:
APRA has already been assessed as an impressive and forceful regulator of traditional financial risks but in a changing financial environment where there are new non-financial risks, APRA needs to be positioned for the future and resourced appropriately.
JOURNALIST:
If there were some concerns in the report about the leadership and the culture there, are you saying the people who have been in charge of that culture who have been efficient are the right ones to fix?
HUME:
Well, APRA's mandate has been to be in charge of oversight and prudential requirements for traditional financial organisations. It's been doing that very well. In fact, the review suggested that it was an impressive and forceful regulator of traditional financial institutions. But as the financial services sector grows in complexity and new non-financial risks begin to become more important, APRA needs to be appropriately resourced and it needs to be appropriately positioned to face those risks.
JOURNALIST:
Senator, the review calls out a lack of transparency operating behind the scenes and being essentially opaque, doesn't the fact that Mr Byers won't even appear in public today tell you they don't get it?
HUME:
Look, Wayne Byers has been a very effective leader of that regulator for a long period of time. APRA, itself, is an effective regulator. It's described as an impressive and forceful regulator in that review. It's important to note that since 1998 when APRA began, there have, in fact, been very few financial failures in institutions in Australia and, in fact, no systemic reviews. APRA has been an effective regulator. The most important thing now is to make sure that it's appropriately positioned for the future and that it can deal with a new and increasingly complex environment and new non-financial risks.
JOURNALIST:
All the things you say about industry super funds, they haven't taken anyone in the superannuation space to court in ten years. Can they really be described as an effective regulator?
HUME:
Well, the APRA capability review did highlight the fact that a new focus needs to be placed on superannuation by APRA and certainly the Government will ensure that in its next statement of expectations that there is new priority placed on superannuation.
JOURNALIST:
Isn't there a bit of a furphy in describing these things as new non-financial risks? These are old risks. These are risks that have been there since 2008. The conflicts of interest that led to huge amounts of fees for no service being charged. Go back to 2008 and there are clearly financial risk, not non-financial risks. Are we talking about the wrong things here? APRA clearly hasn't looked at certain types of financial risks. They're not non-financial risks, isn't that correct?
HUME:
Well, APRA has been described as an impressive and forceful regulator of traditional financial institutions but the financial services sector has changed over time and it's now an increasingly complex environment. What we need to do is ensure that APRA is appropriately resourced and positioned to deal with those new environments and that includes broader than just traditional financial institutions, traditional banks. So we need to include superannuation companies, financial technology firms. This is the new environment that financial services are facing and that APRA is responsible for.
JOURNALIST:
So the APRA chair has indicated that he doesn't agree with too many of the recommendations in the report. What will you do if not all of the recommendations are implemented by APRA?
HUME:
Well, APRA has agreed to take action on all nineteen recommendations that have been directed to it and the Government has agreed to take action on the five recommended to Government too.
JOURNALIST:
There doesn't appear to have been a lot of accountability on APRA at this point because they have essentially done their regulation and it appears they've gotten away with that's what happened. Are you going to pump more money into an organisation that hasn't committed to change the way it needs to?
HUME:
Well, APRA have agreed to take action on all 19 of the recommendations that have been directed to it, as has the Government agreed to take action on the five recommendations directed to Government. We have already allocated an extra $150 million to APRA's budget and that's on top of $58.7 billion that was allocated to them in just November last year to give them additional frontline supervisory staff.
JOURNALIST:
Should APRA be given the power to veto appointments on trustees and under what framework will that take place? I think there will be a lot of concern from industry super and the union movement that they will be unfairly targeted under that sort of proposal.
HUME:
APRA have already been given considerably more powers under the member outcomes legislation that was implemented by the Coalition Government, by the Morrison Government, which was passed, I think it was in April this year. That recommendation was an interesting one, certainly, and it reflects a situation that is already in place in New Zealand and that's one of the recommendations of this review and APRA has agreed to accept all of the recommendations in this review, as has the Government.
JOURNALIST:
How much extra money are you paying? You talk about more resources, so they can handle the new super condition that's recommended, how much more do they need?
HUME:
APRA already had $150 million additional dollars allocated to them in the 2019/20 Budget and that was on top off the $58.7 million that was allocated to it in 2018 to provide it additional frontline supervisory staff. Any additional funding on top of that will be considered in the 2020/21 budget.
PRESENTER:
Jane Hume there, the Assistant Financial Services Minister talking about this APRA report that's just been handed down.