It’s hard to know which of Australia’s supposedly “twin peaks” corporate regulators is going to get a bigger towelling from Royal Commissioner Ken Hayne, but it’s pretty clear that the chairs of both ASIC and APRA will not be looking forward to the current round of hearings.
They are all about “what do you plan to do to stop this happening again?” now that counsel assisting Rowena Orr SC has basically said she doesn’t want any more apologies, she wants action plans.
ASIC chair James Shipton will be first cab off the rank on Thursday in the Sydney hearings, which run until the end of this week, after which they revert to Melbourne and APRA’s Stephen Byres will make his appearance down there.
In his interim report, Commissioner Hayne castigated ASIC for not taking on enough big fish in court, following that up with a withering comment that APRA hadn’t actually initiated any court actions at all in the period under discussion.
It’s instructive to see what the two organisations have been doing in recent weeks, from which they might hope to soften the likely blows.
Earlier this week, ASIC initiated a civil penalty action against Tennis Australia, the sort of mysterious organisation that you probably didn’t even know was in ASIC’s purview.
The case has been in the public domain since January and relates to the granting of the domestic tennis rights to the Seven Network for five years from 2013, without a competitive tender process. Former Tennis Australia directors Harold Mitchell and Stephen Healy are the figures in the frame, although the worst that can happen is for someone to be disqualified from acting as a director.
However it arrives at an opportune time for the regulator, given Harold Mitchell’s high profile and the fact that most newspapers devote more space to sport than to most other endeavours.
The other high-profile case involving ASIC is a bit more complicated. Justice Nye Perram of the Federal Court recently declined to ratify a $35 million settlement payable by Westpac Bank to ASIC as a consequence of Westpac admitting it had broached the responsible lending rules by not checking on borrowers’ financial outgoings.
It’s not clear whether Westpac thought the penalty was on the lighter side and hoped that it would now go away, but the judge concluded Westpac and ASIC had failed to find common ground about what, if anything, Westpac had done wrong.
In these Federal Court cases, it’s basically a case of the two sides bringing an agreed deal to the judge, who then checks to see if proper process has been followed. Until the judge gives it the tick, the deal has no legal validity.
The fact that Justice Perram threw out the settlement means that ASIC will now have to litigate the case in the Federal Court, or agree to a new settlement, or appeal the case to a higher court, or just plain drop it.
All of which is a reminder that going to court is expensive and can sometimes blow up in the regulator’s face.
APRA, meanwhile, has pulled an old dodge in sending the Commission a glorified “mea culpa” document talking about what it plans to do to make the world a better place.
That’s before Wayne Byres has to face questions along the same lines.
I won’t send you to sleep with a full shopping list of promises but the “mea culpa” is motherhood stuff about how APRA is planning on “Reviewing its enforcement strategy and related internal procedures and governance, including the potential to give greater weight to the strategic use of formal enforcement powers.”
That appears to mean they’re going to use the powers they already have.
APRA also says it’s looking at “Deepening its supervisory approach, including focusing on clear accountability, making more regular use of external resources to provide assurance over entities’ practices, and bringing to bear wider sources of information such as reported breaches and customer disputes”.
Which means doing its supervisory job, and in particular following up on reports of breaches and customer disputes. In other words, see above: doing its job.
The best thing for APRA is that from my understanding, that regulator doesn’t want to have its powers increased, and if anything reduced.
In simple terms, APRA wants to focus on its original role of being a prudential regulator and not have to look, for instance, at the knotty issue of bankers’ pay.
What is making the greybeards smile is that APRA pulled that dodge in 2001 after it realized it had almost entirely dropped the ball over insurer HIH.
Realising it was in for a smacking over having decided to appoint an inspector to HIH on the very day it collapsed, 15 March 2001, APRA subsequently called in a well credentialled Canadian regulator, John Palmer, to write an independent report on APRA’s performance.
Palmer’s report was scathing and correct but APRA may have been hoping it would shield APRA management from too much official wrath when the HIH Royal Commission took a look at its performance..
It didn’t. APRA senior management ended up walking the plank and the whole organisation was reconstructed under a three person board, of whom John Laker was the best known.
To APRA’s quiet delight, the Royal Commission has been making much of another report, which APRA commissioned on the culture at CBA. The very damning report, commissioned in 2017 and delivered in April of this year, was co-authored by John Laker.
That’s the good news. Unfortunately for APRA he and co-authors Jillian Broadbent and Graeme Samuel were specifically hired for their independence, so it can’t really be called an APRA triumph at all.
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