Keep up to date with the latest trends in financial services regulation and compliance?
Investing time in your professional development in a rapidly changing financial services industry is a challenge. To meet this challenge, the Australian Regulators Weekly Wrap is designed to keep you at the forefront of your practice by setting up quicklyng on the five main developments of the last week, analyzes and practical considerations for the future.
- Business plan (APRA): APRA has published its new business plan until 2025, focusing on key actions to: 1) preserve the resilience of banks, insurers and pension funds, with a continued focus on financial soundness; cyber risks; governance, risk culture, remuneration and responsibility; and the implementation of the Your Future, Your Super government reforms; 2) modernize the prudential architecture so that it is efficient and accessible, less restrictive for entities and more adaptable to the rapid development of the financial sector; and, 3) better enable data-driven decision making. It contains some details, for example on the adoption of the latest regulatory tools, techniques and practices in areas such as specialist regulatory services, enforcement, transparency and resolution. APRA’s updates always strike me as abstract and full of fashionable compliance jargon to the point of being unnecessary – they’re getting better, though this update probably could have been drastically condensed.
- CPS 220 (APRA): APRA published Guide to prudential practices APG 220 Credit Risk Management (APG 220), which is a new guideline from APRA to help ADIs make prudent lending decisions and meet their requirements under the new prudential standard APS 220 Credit Risk Management. APS 220 requires that an ADI implement a credit risk management framework appropriate to its size, mix of activities and complexity. The framework should include a statement of credit risk appetite, a credit risk management strategy, credit risk policies and processes, a credit risk management function, a management information system and an independent review process. The main changes relate to APRA’s expectations regarding: the role of the Board in managing credit risk, in accordance with the requirements of APS 220; strong credit assessment and approval processes, including providing examples where some additional flexibility might be considered prudent; and the use of automated assessment methods, including examples for the prudent development of scorecards and the use of risk controls.
- Business plan (ASIC): ASIC Business Plan 2021–25 presents its priorities for the next four years. It is more specific than APRA’s in terms of practical details and outlines four strategic priorities: promoting economic recovery, including through better and more effective regulation, facilitating innovation, and targeting regulatory and enforcement measures on the most critical areas. more dangerous ; reduce the risk of harm to consumers exposed to poor governance and product design and an increase in investment scams in a low-return environment; support the improvement of cyber resilience and cybersecurity among the regulated population of ASIC, in line with the government-wide commitment to mitigate cybersecurity risks; and, stimulate industry readiness and compliance with the standards set by legislative reform initiatives (including the financial liability regime, pension and insurance reforms, breach reporting and design obligations and of distribution). The last one is absolutely critical. DDOs and violation reports go into effect October 2021 and will be a great adaptation for everyone in the industry.
- Unfair contractual clauses (Treasury): Time to Refresh These Op-Eds, Government Strengthens Consumer and Small Business Protections Against Unfair Contract Terms Through New draft exhibition legislation; the wonderfully named Amendment to Treasury laws (Measures for a subsequent session) Bill 2021: Reforms of unfair contract terms. The project makes UCTs illegal and gives the courts the power to impose a civil sanction; provides more flexible remedies to a court when declaring a contract term to be unfair by giving courts the power to determine an appropriate remedy, rather than the term being automatically void; provides that the remedies available to “non-party consumers” also apply to “non-party small businesses”; and, creates a rebuttable presumption provision for CPUs used in similar circumstances; increases the eligibility threshold for coverage from less than 20 employees to less than 100 employees, and introduces an annual turnover threshold of less than $ 10 million as an alternative threshold for determining eligibility; and, removes the requirement that the initial price payable under a contract be less than a certain threshold for the contract to be covered by UCT protections. This is an important development which increases the risk associated with UCT provisions in financing and other contracts.
- Statement of Intent (ASIC): the treasurer issued a statement of expectations to ASIC. Read between the lines, stay away from policy making (don’t expect further responsible lending interventions) and stick to the implementation and enforcement of reforms. He is pointing out that : ” …The government expects ASIC to contribute to the government’s economic goals, including supporting Australia’s economic recovery from the COVID-19 pandemic and working closely with the government and the Treasury on the implementation implementing political reforms and exercising its policy-related functions. “
Thought for the future: one month elapses between the start of the DDO, the reporting of violations and the start of the processing of internal complaints. If you don’t have your breach reporting frameworks (including lists of “deemed obligations”), TDG and risk governance frameworks and RG 271, now is the time to start.