APRA looks to boost staff numbers

The banking regulator has joined the rush to hire compliance and data-literate employees, in its first major recruitment drive in 15 years.

It is understood the Australian Prudential Regulation Authority is open to boosting its headcount by as many as 100 staff, following a long period of stable numbers at around 630.

As the post-Hayne royal commission landscape takes shape, after last year’s scathing assessment of APRA and the corporate regulator, both are knee deep in assessing their broader remits and topped-up budget allocations.

It comes as the banks and wealth groups also bolster their compliance and data skills in the wash-up of the royal commission and a stricter interpretation of responsible lending standards.

For APRA, the scaling up includes enforcement, but also goes well beyond that. It is looking to implement a much broader Banking Executive Accountability Regime, as recommended by commissioner Kenneth Hayne, lock down new capital standards, maintain financial stability and ensure it has technology that will aid better utilisation and protection of data.

Enforcement will, however, be top of mind in the near term as a strategy is formulated to define the way forward at APRA, particularly after it received royal commission referrals.

Last year, APRA began a broad review of its enforcement strategy that was delivered to its members last week. This month the enforcement blueprint should be public, giving the industry good insight into the new, bolder APRA.

The enforcement review was led by APRA deputy chairman John Lonsdale, who was assisted by former NSW Supreme Court judge Robert Austin, the Australian Competition & Consumer Commission’s Sarah Court and professor Dimity Kingsford Smith.

The new APRA has in some respects already been on display, though, after it launched a landmark case against IOOF in December.

The Federal Court proceedings allege IOOF’s now former chief executive Chris Kelaher, former chairman George Venardos, fin­ance boss David Coulter, company secretary Paul Vine and general counsel Gary Riordan were not fit and proper people to run a superannuation company.

The case is scheduled to be heard in July.

But just as that is kicking off, whoever is in government will be trawling through the APRA Capability Review being spearheaded by former competition tsar Graeme Samuel.

That will be lobbed with the government on June 30 and, among other things, will “provide a forward-looking assessment of APRA’s ability to respond to an environment of growing complexity and emerging risks for APRA’s regulated sectors”.

With APRA in the crosshairs on several fronts, there was a positive piece of news this week in the shape of Treasury Laws Amendments (Improving Accountability and Member Outcomes in Superannuation Measures No 1).

The legislation passed and delivered the banking regulator sweeping new powers in the $2.7 trillion superannuation market to address poor performance and compel those in that group to merge or exit if it is in members’ best interests.

On the funding side, the federal budget papers showed the government providing $606.7 million over five years from 2018-19 to ­facilitate its initial response to the royal commission. That includes $145m over four years from 2019-20 for APRA, in addition to any funding provided for 2018-19 in the mid-year budget review.

The budget papers cited that the additional resourcing was to facilitate a strengthening of APRA’s supervisory and enforcement activities, including areas addressed in the royal commission around governance, culture and remuneration.

The banking and wealth sector faces an immense task this year on redesigning pay models after the dramatic strikes against remuneration reports in 2018. Embattled wealth group AMP and QBE Insurance will act as test cases for the broader sector when they front investors next month.

Culture and non-financial metrics were a key takeaway from the royal commission, but shareholders want measurable financial outcomes and accountability to be front and centre.

This week, APRA started consultation on how to refine the Banking Executive Accountability Regime variable remuneration arrangements for medium and small authorised deposit-taking institutions. The final legislative instrument will be released before the regime comes into force for medium and small banks on July 1.

Back to APRA’s headcount though, and it’s interesting to note that chairman Wayne Byres touched on the subject at a Sydney conference last month.

It’s no surprise he endorsed a topping up of the broader coffers.

“In the decade since the GFC, our role and activities have expanded notably, yet we still operate with roughly the same headcount we have had for the past 15 years,” he said. “With the royal commission tasking us to increase the intensity of our work in many areas — in governance, culture and remuneration, in superannuation, and in enforcement to name a few — as well as needing to tackle a range of new areas of risk such as cyber, fintech and climate, a material change is needed.

“So we very much welcome the announcement of new resourcing for APRA, and we will be utilising the capability review currently under way to make sure that resourcing is deployed most effectively. We will also be using some of it to implement the outcome of our soon-to-be-complete enforcement review.”

Byres and APRA are poised for another frenetic year.