Bernie Ripoll (Oxley, Australian Labor Party) Share this | Hansard source

I thank the member for Warringah, who says that for me he will dispense with that. It has certainly been the practice for the rest of the morning.

This is a good opportunity to speak about some of the very important and key issues in our financial services sector and some of the changes that need to be made to enhance supervision and enforcement. As we just heard from the member for Wakefield, given the global financial crisis and a range of failures that we have seen in our system, not just here in Australia but across the globe, it is important that we not only acknowledge where some of those failures took place but make real changes in our regulatory regime to minimise them in the future and improve the system that we have before us.

It is sometimes the case that where there are structural flaws or failures in a system you do not see that the system might break until that actually takes place. But that is not always right. There are circumstances where you can foresee structural problems and flaws. In the case before us, I think it is a combination of both. We need an enhanced regulatory regime with supervision and enforcement so that it is continually maintained and scrutinised. Measures need to be taken by government to ensure that our financial system operates efficiently and protects consumers. In the end, what we are referring to is the protection of consumers in a sector in which, for many, involvement is compulsory through the superannuation guarantee or through parts of the financial services sector, including life insurance.

The bill before us will do two things. Firstly, it will remove a gap that exists in the prudential regulation regime by regulating non-operating holding companies of life insurance companies. There currently exists a discrepancy in that those non-operating holding companies are not under the supervision of APRA and they ought to be. APRA currently regulates the non-operating holding companies of general insurers and authorised deposit-taking institutions, but it does not have authority over the non-operating holding companies of life insurers. The scope of the regulatory framework for the non-operating holding companies of life insurance companies is closely modelled on the existing regulation of the non-operating holding companies of general insurance companies and authorised deposit-taking institutions. There were a couple of organisations in the sector—not many—who felt either that this was unnecessary or that the burden of regulation on them was already high enough. They argued the point in a recent Senate inquiry which I will refer to in a moment. I believe that the non-operating holding companies of life insurers should be brought into line. They should be scrutinised by APRA.

The prudential requirements that will apply to non-operating holding companies of life insurers are consistent with the prudential requirements that apply to general insurers. These include governance arrangements, the types of breaches that must be reported to APRA and the types of directions that may be issued. This approach will minimise compliance costs for industry and ensure a smooth transition. Not only that but for the companies involved and for those who use these vehicles the costs will be very, very small indeed. This is an important change because the prudential regulator operates currently under four different acts, including the Life Insurance Act and the Banking Act. Those acts need to work in symphony to provide the best possible mechanisms and tools for APRA to carry out its authority. Removing this gap and regulating the non-operating holding companies of life insurers provides a more efficient mechanism to deal with those issues.

Schedule 2 looks at injunctions. Under this schedule, the bill will strengthen APRA’s powers to enforce the prudential laws through a comprehensive and consistent set of injunctions. This is a very important change. Not only does the bill bring the non-operating holding companies of life insurers under the supervision of APRA but it also gives APRA the power to put in place injunctions in an efficient and timely manner. It is very important for people who may be in breach of regulations that these things take place in a timely manner. The power will apply in relation to authorised deposit-taking institutions, to general insurance, to life insurance and to superannuation.

For any person who breaches or proposes to breach the prudential acts, a condition of authorisation or a direction issued by the Australian Prudential Regulation Authority may be subject to an injunction. I know that members of parliament would have examples in their electorates where action needs to be taken quickly in relation either to an individual or to a scheme. With what we have seen over the past 18 months, you can see the importance of realigning those acts and of making sure that APRA’s powers are the most efficient possible. Certainly, giving APRA a comprehensive and consistent set of powers through injunctions is part of that. This is something which I fully support. I think it is a very appropriate manner in which to deal with these matters.

As an example, APRA can seek an interim injunction to protect the interests of depositors, policyholders or superannuation beneficiaries while the court considers whether to grant a final injunction or to enforce another prudential rule. Again, I think that members of parliament would have examples in their electorates where specific action needed to be taken and where there was a critical period during which an injunction needed to be put in place very quickly, whether temporary or otherwise, in order to stop some form of action taking place.

While it is a fairly straightforward change, it again highlights to the parliament, the community and the financial services sector Labor’s commitment to ensuring an appropriate and efficient set of regulations through APRA, through ASIC and through other bodies. This takes another step in that direction. It ensures that we are taking up our responsibilities. Not only do I commend the bill to the House but also I commend the Assistant Treasurer for the work that he has done in this area.

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