The ASIC – APRA relationship
The role of ASIC
The Australian Securities and Investments Commission (ASIC) is Australia’s financial markets conduct regulator. ASIC is responsible for promoting a fair, transparent and efficient financial system for all.
ASIC regulates the conduct of Australian companies, financial markets, financial services organisations (including banks, life and general insurers and superannuation funds) and professionals who deal in and advise on investments, superannuation, insurance, deposit-taking and credit. ASIC is also responsible for authorisations to operate in industries it regulates.
The role of APRA
The Australian Prudential Regulation Authority (APRA) is Australia’s financial system prudential regulator. APRA is responsible for the licensing and regulatory oversight of financial entities to protect the interests of depositors, insurance policyholders and superannuation fund members. It is also required to balance the objectives of financial safety and efficiency, competition, contestability and competitive neutrality and, in balancing these objectives, is to promote financial system stability.
APRA supervises banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies and most of the superannuation industry.
Cooperation and information sharing between ASIC and APRA
ASIC and APRA have a strong, open and collaborative working relationship and regularly consult and engage on matters of shared interest. Proactive cooperation between ASIC and APRA is important to strengthen the effectiveness and contribute to the efficiency of regulatory outcomes across the financial sector.
ASIC and APRA maintain a continual dialogue, which is facilitated through a formal–engagement structure led by the ASIC-APRA Committee (AAC) to enhance information sharing on both operational and strategic matters. The structure also includes regular liaison meetings an operational level to provide updates on, and input into, matters of mutual interest or concern.
ASIC and APRA have a Memorandum of Understanding (MoU) which sets out a framework for engagement, including coordination, cooperation and information sharing between the agencies.
As there can be alignment between the interests of ASIC and APRA, and the activities of one agency can inform or assist the work of the other, it is important that the agencies maintain strong engagement and proactively exchange information of interest to each other to achieve strong outcomes.
Under the MoU, ASIC and APRA have agreed to:
- proactively provide appropriate information and documents that are relevant to the other agency and responding promptly to information and document requests;
- seek input from, or collaboration with, the other agency to achieve or improve regulatory outcomes, particularly in policy development, enforcement actions, consultation with industry and statistical collections; and
- seek to improve efficiencies for the agencies and industry participants.
Disclosure of protected information
Information about financial sector entities received by ASIC or APRA is generally protected under the confidentiality provisions in the Australian Securities and Investments Commission Act 2001 (Cth) or the relevant secrecy provisions in the Australian Prudential Regulation Authority Act 1998 (Cth).
However, the legislation is not an impediment to information-sharing; it permits ASIC and APRA to share protected information with each other to further their respective regulatory mandates.
Other forms of information sharing
APRA collects data from financial sector entities under the Financial Sector (Collection of Data) Act 2001 (Cth) for a number of purposes, including to assist other financial sector agencies, such as ASIC, to perform their functions or exercise their powers.
As members of the Council of Financial Regulators, ASIC and APRA also regularly liaise with other financial regulatory agencies including the Reserve Bank of Australia and the Australian Treasury to ensure actions are aligned and where necessary, coordinated with the work of other bodies.
ASIC and APRA also coordinate with each other in relation to our various roles in international regulatory bodies, such as the Financial Stability Board, Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the International Organization of Securities Commissions and the International Organisation of Pension Supervisors.
Financial Accountability Regime
The Financial Accountability Regime (FAR) is jointly administered by ASIC and APRA under the framework set out in the Joint Administration Agreement.
ASIC oversees matters concerning consumer protection and market conduct and APRA oversees prudential aspects of the regime.
Regulation of superannuation entities by ASIC and APRA
Registrable Superannuation Entity (RSE) licensees have a broad responsibility to act in the best interests of superannuation fund members. Functional regulators have been established to provide appropriate oversight of how RSE licensees fulfil various aspects of their responsibilities. The key distinctions in responsibilities between regulators are that:
- ASIC is primarily responsible for ensuring RSE licensees meet their conduct obligations in their dealings with consumers, including disclosure and advice to members and ensuring members have access to complaints processes; and
- APRA is primarily responsible for ensuring RSE licensees prudently manage their business operations in a manner consistent with their member best interest obligations and the delivery of quality member outcomes.
2021 update on ASIC-APRA engagement
15 December 2021
The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) each play important roles in protecting the financial well-being of the Australian community through a safe, fair, competitive and efficient financial system. Reinforcing Australia’s twin peaks model of regulation, the agencies have a longstanding commitment to working together to optimise outcomes and minimise regulatory burden.
A Memorandum of Understanding, most recently updated in November 2019, is the foundation of the agencies’ commitment to work together. It is underpinned by an engagement structure that enhances cooperation through regular strategic discussions between ASIC Commissioners and the APRA Members; including through the ASIC-APRA Committee and supporting Standing Committees of senior members from each agency. These formal arrangements are supported by various working groups and information sharing between both agencies.
ASIC and APRA have worked closely on a number of matters of mutual interest in relation to cross-industry and industry-specific issues in 2021.
The agencies have worked together to deliver long-term benefits through a number of significant law reforms. The Australian Government’s new Financial Accountability Regime (FAR) has been a particular focus in this regard. The FAR is aimed at improving the governance and risk management of entities in the banking, insurance and superannuation sectors, and increasing transparency and accountability across these sectors. ASIC and APRA are working together to develop the framework for jointly administrating the FAR to enable collaboration and coordination, and to minimise duplication, in areas of joint regulatory interest.
Both agencies continue to work together to support the financial system, protect consumers and support the economic recovery from the COVID-19 pandemic. For example, the agencies have:
- collaborated on loan repayment deferrals and borrower hardship, and a range of issues concerning the insurance sector (including in relation to business interruption insurance and individual disability income insurance).
- participated in a cross-agency working group with the Treasury and the Australian Financial Complaints Authority to engage with industry on business interruption insurance test cases being heard in the Federal Court. Working together helped progress these test cases in a timely and efficient manner and generated significant engagement from industry.
- co-chaired a Trans-Tasman Supervisory College during 2021 that brought together six Australian and New Zealand regulators to consider issues related to consumer protection, prudential regulation and conduct regulation (among others).
- engaged with jointly regulated financial service providers on the issues of cyber readiness and operational resilience. Also, as part of the Council of Financial Regulators, ASIC and APRA have been developing a protocol to deal with the management of a cyber incident at a financial service provider.
There continues to be significant engagement in the area of superannuation, with ASIC and APRA acting to support confidence in the superannuation industry and deliver quality superannuation outcomes for Australians. The implementation of the Member Outcomes obligations and Design and Distribution Obligations, administered by ASIC and APRA respectively, saw the agencies work together to ensure trustees understood the interaction between the two sets of obligations. Outputs from that work included a joint letter to industry, joint speaking engagements and a CEO roundtable. There has also been joint communication to industry regarding the agencies’ expectations in relation to superannuation trustees’ oversight of advice fee deductions.
ASIC and APRA have also undertaken strategic work to strengthen cooperation on enforcement matters. An example of this cooperation was the agencies’ engagement during their respective investigations in relation to AMP superannuation funds. The court enforceable undertaking accepted by APRA in November 2021 was designed to address regulatory concerns of both ASIC and APRA with AMP Super.
More generally, information sharing — ranging from sharing insights from supervision activities to formal exchanges of relevant information (including in relation to enforcement matters) — continues to be central to engagement between the agencies. Collaboration on industry data collections continues to provide opportunities for both agencies to effectively and efficiently collate insights to inform their respective work. Over the course of the past year, the agencies’ cooperation was bolstered by the implementation of the new statutory regime, implemented via the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, that facilitates and removes barriers to sharing of intelligence and information. This legislation has helped formalise the agencies’ commitment to cooperation.
Over the next 12 months, ASIC and APRA will continue to collaborate; working together to deliver coordinated and efficient regulatory outcomes and to support the ongoing safety and strength of the Australian financial system.
2020 update on ASIC-APRA engagement
22 December 2020
The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) each play important roles in protecting the Australian community through a safe, fair, competitive and efficient financial system. Both agencies have a longstanding commitment to working together to facilitate cooperation and collaboration and to strengthen the effectiveness and contribute to the efficiency of regulatory outcomes across the financial sector.
In 2019, this commitment was reinforced through a new Memorandum of Understanding (MoU) underpinned by a revised engagement structure comprising regular strategic discussions between ASIC Commissioners and the APRA Members, and supported by largely industry-based standing committees of senior representatives from each agency. The committees have facilitated strategic discussions on key risks, greater information sharing, and coordination on supervisory and enforcement matters.
This statement fulfills the agencies’ obligation under the MoU to report annually on their engagement activities.
Over the past 12 months the agencies have demonstrated strengthened collaboration in important areas. For example:
- COVID-19 amplified the need for alignment in response to common problems. Both agencies worked together with the banking industry on measures to help customers faced with loan repayment difficulties because of the pandemic. APRA adjusted capital and provision requirements for loan deferrals, and worked together with ASIC to ensure that messaging to ADIs, particularly in relation to expectations, was consistent and aligned. In August, the agencies worked jointly with industry on plans to review the position of all customers who had deferred loan repayments and the agencies continue to work on the ongoing performance of the broader credit portfolio. Central to this alignment was that data needed by each agency was captured in a single request.
- Each agency has available an array of enforcement tools that each seek to use efficiently and effectively. Conduct issues can give rise to breaches of legal requirements under the respective remits of both agencies. In two cases – Tidswell and Westpac – the agencies agreed that ASIC should be the lead regulator to address alleged misconduct. These decisions were designed to avoid significant duplication in the investigative process for each regulator and the institutions, and focus the institutions on a single regulatory response.
- In superannuation, ASIC and APRA have worked together to ensure guidance to trustees was integrated, including jointly informing all licensees on 1 April 2020 of current and new obligations prompted by the crisis. the agencies have also collaborated on developing and implementing a single pandemic data collection.
- ASIC and APRA’s work to date on business interruption insurance is an example of the agencies proactively responding to an emerging risk early in the pandemic crisis. The agencies continue to share data and analysis to understand the extent of industry exposure, and policyholder protection and solvency implications. ASIC and APRA actively participated in a cross-agency working group with the Treasury and the Australian Financial Complaints Authority (AFCA) to assess the extent of the issue and advance the business interruption insurance test case with industry.
- ASIC and APRA have aligned communication on key policy changes, such as recent updates to the agencies’ respective frameworks because of changes to accounting standards relating to insurance contracts.
- Both agencies remain committed to maintaining close coordination as policy and supervision initiatives suspended in response to the crisis begin to recommence.
In 2021, ASIC and APRA’s cooperation will be reinforced by the implementation of Royal Commission Recommendation 6.9 via a statutory obligation to cooperate, share information and notify each other of suspected entity breaches of laws administered by the other. This legislation will further formalise this commitment and the progress made to date to closer collaboration and information sharing.
Key regulatory priorities of 2021 - including implementation of the latest consumer credit and superannuation reforms, preparation for the Financial Accountability Regime (FAR), and improving performance assessment frameworks - emphasise the continued importance of collaborating and working effectively and efficiently together.
More importantly, ASIC and APRA will continue to work together on supporting the financial system, businesses and consumers as they enter the next stage of recovery from the COVID-19 pandemic.