The Australian Prudential Regulation Authority (APRA), the prudential regulator of the financial services industry, has released details of its new enforcement approach, setting out how it will approach the use of its enforcement powers to prevent and address serious prudential risks, and to hold entities and individuals to account.

The new approach means that in future, APRA will be less patient with the time taken by uncooperative entities to remediate issues, more forceful in expressing specific expectations, and prepared to set examples using public enforcement to achieve general deterrence, APRA chairman Wayne Byres said.

The new enforcement approach is founded on the results of APRA's enforcement review, which has made recommendations designed to help APRA better leverage its enforcement powers to achieve sound prudential outcomes.

Mr Byres said APRA would implement all the recommendations, including:

• adopting a “constructively tough” appetite to enforcement and setting it out in a board-endorsed enforcement strategy document;
• ensuring APRA supervisors are supported and empowered to hold institutions and individuals to account, and strengthening governance of enforcement-related decisions;
• combining APRA’s enforcement, investigation and legal experts in one strengthened support team, and ensuring resources are available to support the pursuit of enforcement action where appropriate; and
• strengthening cooperation on enforcement matters with the Australian Securities and Investments Commission (ASIC).

APRA deputy chair Mr John Lonsdale who conducted the review said that the findings are that APRA had, on the whole, performed well in its primary role of protecting the soundness and stability of institutions. But he said APRA could achieve better outcomes in the future by taking stronger action earlier where entities were not cooperative or open, and by being more willing to set public examples.

“The recommendations of the Review will still mean that APRA as a safety regulator remains focused on preventing harm with the use of non-formal supervisory tools. However, APRA will be more willing to use the full range of its formal powers – such as direction powers and licence conditions – to achieve prudential outcomes and deter unacceptable practices,” he said.

APRA members formally commissioned the Enforcement Review last November in response to a range of developments, including the creation of the Banking Executive Accountability Regime, the Prudential Inquiry into Commonwealth Bank of Australia, evidence presented to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and proposals to give APRA expanded enforcement powers, particularly in superannuation.