Kelly O'Dwyer (Higgins, Liberal Party) Share this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's report entitled Review of the Australian Prudential Regulation Authority annual report 2013 (First Report)together with the minutes of proceedings and evidence received by the committee. I ask leave of the House to make a short statement in connection with the report.

Leave granted.

I am very pleased to be presenting the Economics Committee's first report of its review of the Australian Prudential Regulation Authority's 2013 annual report. This report follows a hearing with the chairman and other officials of APRA on 18 July 2014 in Canberra. APRA is the primary regulator of Australian financial institutions which currently hold $4.5 trillion in assets. APRA regulated industries include banking, insurance and superannuation. This report is timely given the changes in the financial sector since the last review of APRA's activities by this committee in 2004.

At the public hearing on 18 July the Chairman of APRA, Mr Wayne Byres, stated that the financial sector is broadly in good health. The committee notes from the APRA 2013 annual report that the Australian economy grew at a relatively steady pace over the 2013 period and that the effects of the global financial crisis have begun to lift. In the banking industry the committee has learnt that Australia is well placed to implement the global prudential reforms recommended by the Basel Committee on Banking Supervision. It is pleasing that Australia's major banks are operating well and continue to be closely supervised by APRA.

APRA has been active in monitoring and imposing capital requirements on the banks and has also reviewed these requirements for insurance companies. The committee heard from APRA that it is not the priority or first preference of the Basel reforms to impose a simple leverage ratio to determine capital requirements. Mr Byres commented at the public hearing that this leveraged ratio is included within a package of Basel committee reforms as a backstop or supplementary measure.

The Stronger Super reforms have brought the prudential standards of the banking and insurance industries to the superannuation industry and seem to have had a positive start. APRA informs the committee that the superannuation industry is making very good efforts to improve and meet these new requirements. The committee will continue to provide oversight of the impact of these changes.

APRA has noted some concerns that been raised by the committee and by others about housing lending standards. The chairman acknowledged that there is evidence of lending in this sector with higher risk characteristics but this was not a trend that APRA wished to see continue and it was being closely monitored.

The committee is pleased that APRA regulated industries are performing well and that Australia is emerging from the global financial crisis on a relatively good footing. The implementation of the Basel III international banking standards is of continuing interest and the committee will monitor the implementation of these reforms to ensure that they remain appropriate to the needs of the Australian financial sector.

The Future of Financial Advice reforms are yet to be completed but there are no concerns are present in this area.

The committee has requested that APRA appear at public hearings twice a year, similar to the committee's oversight of the Reserve Bank of Australia. The next hearing will be held in Canberra on 28 November 2014. Finally, on behalf of the committee, I would like to thank the Chairman of APRA, Mr Wayne Byres, and other representatives of APRA for appearing before the committee on 18 July 2014. I commend the report to the House and move:

That the House take note of the report.

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