As controversy continues to swirl around industry fund MTAA Super, Tasmanian Liberal Senator David Bushby argues it is time for the Australian Prudential Regulation Authority to step up on the question of accountability.
Under the APRA Act 1998 our prudential regulator must develop and publish a code of ethics. With this obligation, the Australian Prudential Regulation Authority (APRA) is perhaps unique among Federal agencies.
I have taken the opportunity to peruse this code, and it is a well-formulated governance statement that could be made to apply to other agencies. This is important if our Federal regulatory agencies and their management are committed to making their organisations look and feel like a modern corporation working under listing rules and securities regulations, which have dramatically changed for the better during the past decade.
One of the quite commendable statements in the APRA code is in relation to accountability:
- We hold ourselves to at least the same standards that we expect of regulated entities.
- We welcome independent scrutiny, and respond promptly to aspects of our performance that are identified as needing improvement.
In the past few years and months there have been a number of articles in Money Management on one of our major superannuation funds, the MTAA. These articles have reported to readers matters relating to the fund’s governance and regulation, and the role that APRA might or might not have played. I would add that Money Management has often reported on other funds and financial institutions, especially when regulatory concerns have arisen.
I can remember AMP, Zurich and MLC being the subject of enforceable undertakings following regulatory action by our twin peak regulators (ASIC/APRA) and the regulators making public statements on these outcomes. Furthermore, the public release of this information informed the market, and the institutions in question went on with their business.
It is important that the media cover such issues just as the media does for our banks and other financial institutions. After all, for most Australians, superannuation is their largest asset after their family home.
Also, the media needs to report on what is happening in the community and its economy, and this in turn acts as an automatic regulatory control over those bodies that have been assigned the task of protecting other people’s money. The role of the media on a day-to-day basis is not dissimilar to that of the continuous disclosure regime that makes companies divulge to the market any material matters which might impact their business or underlying shareholder value.
Having read some of the MTAA articles, I decided to ask APRA some questions – 11 in all – at the June round of Estimates on the matters that Money Management has reported. Six weeks later I received its answers.
To say the least, I was somewhat deflated when I read the regulator’s response. In relation to nine of the questions, APRA advised it would provide no answer whatsoever. APRA said it was precluded from doing so under the secrecy provisions of its parent Act.
The questions were hardly earth-shattering or market busting probes. They included how much APRA had paid for a consultant to review MTAA, and what powers it had conferred. Another question (not answered) related to what options APRA had when it had concerns about a particular fund’s governance arrangements.
Yet another question was even more general, since it related to APRA’s in-house regulatory capability and whether its resources were sufficient to conduct investigations of this type.
What concerns me in relation to APRA is that it appears not to understand the public benefits of accountability of regulators such as itself, to Parliament, which provides a vital oversight role of such organisations in a well functioning democracy.
It is also labouring under the misapprehension that it could be in breach of its Act if it provides the Senate with answers to some of the questions that I placed on notice. The fact is that answering such questions would not be a breach of its Act. The Clerk of the Senate has provided advice that states that any APRA evidence to the Parliament has the protection of parliamentary privilege.
Furthermore, the Clerk advised that: “It is well established that a general secrecy provision [which the APRA statute has] does not prevent the provision of information to a House or committee of the Parliament in the absence of an express statement to the contrary. In other words, the inquiry powers of the Houses are not affected by secrecy provisions.”
Of course, there are accepted and clearly understood circumstances under which an entity such as APRA can avoid answering questions in parliamentary forums, generally related to public interest. But APRA did not seek to invoke any of those exceptions.
APRA needs now to go back to its code of conduct and reassess its accountability statements. If its regulated entities treated APRA the same way APRA appears to be treating its parliamentary oversight body, APRA would be incapacitated as a regulator.
