APRA's new enforcement strategy will see it toughen up, but its safety-first approach will be retained.
The prudential regulator released its new enforcement strategy alongside the enforcement review that commenced in November after its enforcement methods came under sharp public scrutiny during the Royal Commission.
The new strategy will see APRA adopt a "constructively tough" appetite to enforcement, and ensure its supervisors are "supported and empowered" to hold Australia's financial services institutions - and the individuals working within them - to account.
The new strategy will also bring together APRA's enforcement, investigation and legal experts, forming one strengthened support team allowing enforcement action to be pursued. The regulator will also seek to strengthen its relationship with ASIC, with the two set to improve their coordination over enforcement matters.
APRA deputy chair John Lonsdale - who conducted the review - said the prudential regulator could do better by taking stronger action earlier when entities are not cooperative or open. APRA should be more willing to set public examples, he said.
"To remain effective, we must continue to evolve and improve, especially in response to the ways in which non-financial risks, such as culture, can impact on prudential outcomes," Lonsdale said.
"The recommendations of the review will still mean that APRA as a safety regulator remains focused on preventing harm with the use of non-formal supervisory tools. However, APRA will be more willing to use the full range of its formal powers - such as direction powers and licence conditions - to achieve prudential outcomes and deter unacceptable practices."
APRA chair Wayne Byers said formal enforcement is an important weapon in the regulator's arsenal, but noted it would still resolve issues "in most cases" through non-formal tools.
"As our powers have recently been strengthened in a number of areas, the new enforcement approach will ensure we make use of those powers as the Parliament intended," Byers said.
"That means that in future, APRA will be less patient with the time taken by uncooperative entities to remediate issues, more forceful in expressing specific expectations, and prepared to set examples using public enforcement to achieve general deterrence."
APRA said Byers had indicated support for the review's recommendations on legislative change. Namely, that APRA seeks the government's consideration of legislative amendments to close gaps in its superannuation enforcement powers and remedy the adequacy of penalties.
The review also recommended that the Government remove barriers to conducting joint investigations with ASIC, including allowing the two regulators to share the information they collect.
"APRA and ASIC should have full and unrestricted use of information obtained under the investigation and examination powers of the other agency. At present, APRA and ASIC may only exercise their investigative powers for their own purposes and not for the purpose of another agency, unless legislation specifies otherwise," the review said.
"This acts as a barrier to the agencies using their powers in concert and simultaneously."