ASIC inspectors will be embedded at the big banks as early as this week and the regulator’s chairman, James Shipton, has warned superannuation trustees they could be up for a similar proactive approach to enforcement.
Appearing before a Parliamentary Oversight Committee on Friday, Shipton said the regulator was “days and weeks” away from embedding onsite supervisors into the banks and AMP, with at least one bank was earmarked for next week.
“This is meaningful from a supervisory perspective,” he told the committee. “We have appointed very senior members of our staff to be chief supervisory officers. These two individuals will be leading supervisory teams on site.”
In August, the corporate watchdog unveiled a more aggressive supervisory approach following a $70.1 million funding injection from the federal government. Then-financial services minister Kelly O’Dwyer said ASIC would be “embedding dedicated staff within these institutions [banks] to monitor governance and compliance actions”. Prime Minister Scott Morrison, who was then Treasurer, said at the time that he supported the notion of putting a “principal integrity officer” into each of the big five financial institutions, in the same way that chief pilots operate at airlines.
At the same time ASIC deputy chairman Peter Kell said super trustee which also run a managed investment scheme may be faced with a “structural conflict that frankly can’t be adequately addressed”.
On Friday, Shipton also provided further details about a more proactive approach to overseeing super funds as well, indicating it would work more closely with the Australian Prudential Regulation Authority.
“There is a separate exercise because we have got funding from the government…where we are going to be increasing supervision of super trustees,” he said.
While there were no current plans for onsite supervisors to be embedded within funds, this was a possibility Shipton said.
“I will, in the future, be employing a permanent and semi-permanent onsite component, but it will increase the number and frequency of [interactions] between our supervision officers…and trustees in the super space,” he said.
Appearing on the same panel before the parliamentary committee, ASIC’s senior leader, investment managers and superannuation, Jane Eccleston, said there would be “increasing resources in super”. This includes more staff “dedicated to super full time, so that will allow us to continue working with APRA”.
Both regulators got a pasting from Commissioner Kenneth Hayne at the ongoing banking inquiry, criticising them for lagging enforcement times and an at-times cosy relationship with the banks and AMP.
In his recent interim report, Hayne questioned whether ASIC was doing enough.
“As the commission’s work has continued, there are signs that ASIC may be seeking to alter its approach to enforcement,” he noted in the report. “Even so, I remain to be persuaded that it can and will make the necessary changes.”
Among the “several reasons for caution” Hayne listed relating to ASIC’s ability to fill its brief as a regulator, Hayne noted: “There seems to be a deeply entrenched culture of negotiating outcomes, rather than insisting upon public denunciation of, and punishment for, wrongdoing.”
On the wider plan to embed onsite inspectors, Shipton provided greater detail about how it might work and addressed concerns that embedded officers could become complacent.
“We will have rotations of teams in the future, so people won’t just be working with one institution over time and running the risk of getting conditioned,” Shipton said.
He added that the chief supervisory officers would be speaking directly with the company’s top brass.
“We want senior people talking directly with the CEO and the C-suite, having face-to-face conversations to pass on, or impart, the regulatory message,” Shipton said.
At the same time, the ASIC chairman wants his supervisors to access all levels of an institution.
“We want to get right up and down the vertical of these institutions and across, because these are big conglomerates…to get out of the headquarters, to get into the branches, and just to be interacting with as many people as possible in the entirety of the organisation,” Shipton said.