APRA chairman says CBA inquiry will establish public trust

Australian Prudential Regulation Authority chairman Wayne Byres has said the “community trust and confidence was an important consideration” behind its recent inquiry into money laundering involving the Commonwealth Bank.

He said the CBA has experienced a number of incidents over recent years that have damaged its reputation.

“After the AUSTRAC matter came to light, it was difficult to see how the bank could quickly remedy the situation by itself,” he said.

The APRA chairman’s statement came during his opening statement to the House of Representatives Standing Committee on Economics.

Byres said the inquiry is expected to reaffirm to the larger public of that regulators were working on addressing irregularities and would send a signal to other lenders as well.

“In that sense, we very much see the Inquiry as making a constructive contribution to strengthening the reputation and public standing of the bank,” he said.

“As an added benefit, any issues identified will provide useful learnings to others in the industry.”

He also said that the the risks in the housing market that were pointed out in APRA’s 2015/16 Annual Report still hold.

“We called out risks in the housing market, the funding profile of the banking system, poor experience in some segments of the insurance industry, and the need to enhance governance and transparency in the superannuation industry. These issues remain prominent today,” said Byres.

Although he said that at a macro level, Australia continues to benefit from a sound financial system that reflects a long period of economic growth and resilience in financial institutions. 

However, there was no room for complacency.

Byres also used the opening remarks to update the committee on APRA’s response to the recommendations from the Committee’s Review of the Four Major Banks.

One of the recommendations was for a review of the licensing requirements for Authorised Deposit-taking Institutions (ADIs) and there were several others designed to strengthen accountability and transparency of financial institutions.

The Banking Executive Accountability Regime (known as the BEAR), will increase APRA's powers, that among other things, include fines to be imposed on errant ADIs.

He said the core objective of the BEAR was "establishing clearer accountabilities for, and expected standards of behaviour by, senior executives within banks" and was being constructed in a manner that is consistent with APRA’s prudential mandate.