David Coleman (Banks, 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 2015 (first report), together with the minutes of proceedings.

At the recent public hearing held by the committee with APRA in March, the committee was updated on the state of the Australian financial sector and on APRA's recent activities and priorities for 2016. It is certainly pleasing that Australia's financial system remains sound in the face of recent volatility. The committee agrees with APRA's view that complacency must be avoided, and it will continue to monitor any future changes in subsequent APRA responses.

In the banking sector, APRA states that its activities will continue to be strongly influenced by the financial system inquiry recommendation for unquestionably strong capital ratios. We will monitor and scrutinise APRA's planned framework to achieve this over the next few years.

APRA's measures to reinforce sound residential mortgage-lending practices, announced in its letter to all authorised deposit-taking institutions in December 2014, are of particular interest to the committee. We will continue to scrutinise whether the objectives of these measures are being achieved and their impact on the housing market. The committee will also examine at future hearings the outcomes of the higher mortgage risk weights for larger banks that APRA is implementing from July of this year.

The governance of APRA-regulated institutions is a major focus for APRA, and is of course of continuing interest to the committee. APRA informed the committee that a good corporate culture within the entities that it supervises protects against poor outcomes, and is therefore a key area of its focus. APRA also stated that this emphasis reflects its prudential mandate.

In the superannuation sector, APRA advised that board appointments, strategic planning, performance assessment processes and conflict management were priorities in 2016. APRA also indicated that it is consulting on changes designed to improve governance standards for superannuation funds, which it intends to introduce at a future date. The committee looks forward to future updates from APRA on the implementation of these standards and their impact.

The committee was also advised that it has been engaging with the directors of authorised deposit-taking institutions and insurers to make certain that they understand their obligations under the prudential framework. APRA indicated that it would also release a road map later this year for its new prudential oversight of the private health insurance industry. The committee will seek advice from APRA on the progress of this framework at future hearings.

On behalf of the committee I would like to thank the chairman of APRA, Mr Wayne Byers, and all the representatives of APRA who appeared at our hearing on 18 March of this year. I commend the report to the House.

Report made a parliamentary paper in accordance with standing order 39(e).

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