John Lonsdale appointed new prudential regulator chair

The government has shaken up the agency’s leadership after the departure of Wayne Byres, selecting the former Treasury official and current deputy chairman to take over from Monday.

John Lonsdale has been APRA deputy chair since 2018. Picture: Mick Tsikas/AAP

John Lonsdale, the new chairman of the nation's banking regulator, says he is watching “very closely’ a “small uptick” in non-performing loans, but had described the overall delinquency rate as “quite low”.

“Over recent years, we watch all those metrics very, very closely those core financial metrics,” said Mr Lonsdale on a call after he was announced as the next Australian prudential Regulation Authority chairman. “But in some pockets, small business would be an example, there’s a small uptick there.”

Mr Lonsdale, a former Treasury official, will succeed APRA’s current chairman, Wayne Byres, who has concluded his term. His appointment came as the government made several other changes to the agency’s executive team.

Mr Lonsdale is currently the Australian Prudential Regulation Authority’s deputy chairman, and will begin his new role on Monday. Margaret Cole, currently an APRA member, will become the agency’s deputy chair while Suzanne Smith and Therese McCarthy Hockey will be promoted to the APRA board.

“The challenges in front of us are significant – a rapidly shifting macro-economic environment, rapid technological development that challenge business models and regulation, cyber threats, insurance affordability pressures, climate change and improving the performance of our superannuation system to name a few,” said Mr Lonsdale. “Managing these challenges will deliver better outcomes to the Australian people.”

Mr Lonsdale has been APRA’s deputy chair since 2018 and was previously deputy Treasury secretary where he had responsibility for the financial system and consumer and foreign investment policy. Ms Smith and Ms McCarthy Hockey have been responsible for APRA’s work in super and banking respectively.

The prudential regulator has been roundly criticised during Mr Byres’ tenure, with a review undertaken in 2019 identifying significant cultural issues, including a lack of transparency. Several recommendations in the review, chaired by former Australian Competition & Consumer Commission chairman Graeme Samuel, called for changes to the regulator’s structure and a stronger approach to enforcement, an issue highlighted by the financial services royal commission.

The review labelled APRA’s behind-the-scenes approach to engagement with banks, insurers and superannuation as limiting “its impact and authority”.

The review labelled APRA’s behind-the-scenes approach to engagement with banks, insurers and superannuation as limiting “its impact and authority”.

“There are good reasons for a prudential regulator to be discreet, particularly in cases of acute financial stress. However, APRA needs to shift the dial towards a more strategic and forceful use of communication to ensure that it maximises its impact with regulated entities,” the report said.

Mr Samuel told The Australian this week that he felt APRA had not adequately addressed the findings, even now. “You would have thought a review of that nature would demand and merit careful introspection by APRA but my perception is that didn’t take place,” he said.

On Friday, Mr Lonsdale said APRA has a strategy in place to respond to current challenges and emerging issues for the financial system. “APRA’s strength is its diligent and committed people, who have a clarity of purpose and clear focus on ensuring the financial interests of Australians are protected and the financial system is stable, competitive and efficient. The members and I want to ensure we continue to build on this strength,” he said.

Separately, speaking to reporters, he said: “In terms of what we were tasked to do, we’ve certainly done that. We’ve included a lot of the accountability and governance work in the day to day operation of how we supervise our regulated entities.”

“I think there was some key leanings there and on enforcement, we’ve got a constructively, tough enforcement approach.

“”It’s a lot more forward looking. It’s a lot more outcomes based. And we’ve been taking action where entities have not been adhering to prudential standards.

“We’ve done a lot of the learning and now we’ve got to keep applying that,” he added.

Mr Byres said Mr Lonsdale had made “significant contribution to the stability, efficiency and competitiveness of the Australian financial system.