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Financial regulators ASIC, APRA to be regulated by new authority

Legislation that will create a new watchdog to scrutinise Australia’s twin-peaks financial regulator model has now passed both houses of Parliament.

Business Jotham Lian 25 June 2021
— 1 minute read

The Financial Regulator Assessment Authority Bill 2021 now awaits royal assent after the bill passed both houses on Wednesday.

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The legislation will see the establishment of the Financial Regulator Assessment Authority (FRAA), which will be tasked to evaluate both ASIC’s and APRA’s effectiveness and capability every two years.

The new regulator of regulators will receive $7.7 million over three years as part of the set-up and will consist of three appointed part-time members, including an independent chair. The Treasury secretary will also be part of the new authority as an ex-officio member.

As its first order of business, the FRAA will be tasked with taking a closer look at ASIC as the corporate regulator looks to restructure following the departure of previous chair James Shipton in late April.

“In its first year, the FRAA will be tasked with assessing the effectiveness and capability of ASIC so as to assist newly appointed ASIC chair Joseph Longo in ensuring ASIC is operating consistently with the government’s Statement of Expectations and is supporting Australia’s economic recovery from the COVID-19 pandemic,” said Treasurer Josh Frydenberg.

Mr Frydenberg also noted that the FRAA’s biennial reports on both ASIC and APRA would complement the existing accountability mechanisms that apply to the regulators.

The creation of the new financial regulator watchdog comes after the Hayne royal commission found that ASIC’s and APRA’s effectiveness in delivering on their mandates was not subject to consistent and independent expert review over time.

It noted that while both regulators were already subject to an array of external assessment, review and oversight mechanisms, greater expertise beyond the scrutiny of politicians was required to keep them accountable.

“While both regulators are accountable to the Parliament, the financial services royal commission noted that parliamentary committees, including Senate estimates, have some limitations in assessing the effectiveness of the regulators (for example, the fields of expertise required to assess the regulators),” the bill’s explanatory memorandum said.

“Both agencies report extensively on their activities, but these reports are not necessarily subject to rigorous and consistent external analysis. Performance audits by the Australian National Audit Office are conducted on an ad hoc basis.

“The [new] authority’s activities are designed to complement and augment the existing external accountability mechanisms that apply to the regulators, not to duplicate them.”

Financial regulators ASIC, APRA to be regulated by new authority
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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