APRA’s role as a superannuation watchdog has been tarnished after chairman Wayne Byres revealed the regulator did nothing when NAB confessed it had been charging retirement savers for services never provided for as long as seven years.
The admission, which came on the final day of hearings at the banking royal commission, further strengthened the argument for a regulatory oversight committee or ‘mega regulator’ following Commissioner Hayne’s earlier criticisms that the regulators were too timid.
Mr Byres was the last of 134 witnesses to appear on the 68th day of hearings, which have taken place in Melbourne, Brisbane, Darwin and Sydney. The inquiry has attracted 400 witness statements and 6500 pieces of evidence have been tendered.
There was no evidence however of APRA’s decision not to pursue NAB after it confessed in August 2014 that it had been incorrectly charging customers fees since 2007 and would go on to inform the regulator of similar breaches twice more. The bank has repaid $110 million over the scandal and ASIC launched legal action against the bank in September.
Mr Byres said to the best of his recollection the supervisor responsible would have “followed up” on the confession and “made further inquiries” but told counsel assisting Michael Hodge QC there was no formal investigation.
“Unfortunately, these are all too common in financial institutions… I think they would have discussed the issue with the organisation,” Mr Byres said.
“They were very conscious that ASIC was investigating the issues. There were other issues they were grappling with at the time. So the idea of diverting resources and replicating the ASIC work didn’t seem to be a particularly sensible thing to do,” Mr Byres said.
Over $1 billion compensation bill
The fees-for-no-service issue has a compensation bill of $1 billion and rising with some analysts tipping the total figure will be closer to $6 billion.
APRA’s chairman did not agree that the charging of fees for which no services were provided were systemic. But he agreed it was a “widespread and significant problem”, which he sheeted back to insufficient attention to detail and compliance.
Mr Byres was asked to explain why no detail had been provided to financial institutions about penalties for breaching the banking executive accountability regime, or BEAR.
Mr Byres said the regulator opted not to detail the penalties, which include disqualification and financial penalties, in an information paper in October because it was caught up in broader thinking about enforcement strategy. This included whether or not to broaden its application to investment firms, investment banks and stockbrokers.
However he appeared unfamiliar with a document that outlined the regulator’s enforcement strategy, which he admitted he only saw for the first time the previous evening when it was included in the tender bundle listing relevant pieces of evidence for the hearing.
“I have to say, as I said, I have never seen the document until last night. And I’m not sure on the basis on which it was prepared,” Mr Byres said.
“I see. You don’t know whether this is actually APRA’s enforcement strategy or not?” Mr Hodge asked.
“Look, as I read through it last night, I thought it was a reasonable articulation, but it’s not a, for want of a better term, it’s not a board-approved document or a board-approved articulation of strategy,” Mr Byres replied.
“Does it seem problematic to you that APRA, given its conduct role in relation to superannuation, would not have a board-approved enforcement strategy?” Mr Hodge asked.
Commissioner Hayne asked Mr Byres if he had seen the G30 paper released that morning that described Australia’s banking culture as at the beginning of a long journey to repair its conduct and culture. Mr Byres agreed and said it was a fair statement.
Mr Byres also said there were limits to APRA supervision and to some extent it was reliant “on institutions bringing issues to our attention”. Commissioner Hayne is expected to hand down his final report before February 1.