Role of APRA and ASIC in Financial Regulation in Australia

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Law of Finance
Assignment (Part 1)
03-Apr-18
(Student Details: )

Law of Finance
Introduction
In Australia, the financial regulation is quite detailed and extensive. The financial regulation is
split in the nation between Australian Prudential Regulatory Authority, i.e. APRA, and
Australian Securities and Investments Commission, i.e. ASIC. Both APRA and ASIC, have
different regulatory roles when it comes to the financial services sector and this includes banking
(Tyree, 2014). In reference to the lending practices of Australian banks, both the bodies have
published their concerns. This discussion is focused on highlighting the role of the two and the
manner in which their responsibility is different from each other. Further, a summary would also
be provided in context of the concerns of these two and the actions proposed by them.
APRA and ASIC
APRA
APRA on the other hand, has the responsibility of licensing and for the prudential supervision of
ADIs, i.e. the Authorized Deposit-taking institutions, superannuation funds, and life and general
insurance companies. The APRA regulated financial institutions are obligated to submit period
reports to APRA (Lui, 2016). It has also brought forth the capital adequacy guidelines for the
banks, which match the Basel II guidelines. Such investment banks which are not operated under
the ADIs, are not regulated under the Banking Act, 1959, and are not licensed under this
legislation, are not subjected to the APRA’s prudential supervision (OECD, 2017). Though, the
majority of investment banks have to provide APRA with the statistical information based on the
Financial Sector (Collection of Data) Act, 2001 (Pearson and Batten, 2010). APRA is basically
an integrated prudential regulator which has the responsibility for deposit taking institutions like
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Law of Finance
credit unions, banks and building societies, along with the friendly societies. The prudential
policies have to be developed by APRA which balance the financial safety and competitive
neutrality, competition, efficient and contestability (Reserve Bank of Australia, 2018).
ASIC
ASIC has the responsibility for consumer protection, market integrity, and for the regulation of
finance companies and investment banks. Though, when it comes to the practical aspect, this
function is manifested by application of EDRs, i.e. External Dispute Resolution schemes.
Presently, there are two EDRs approved by ASIC. And in this, the prominent one is FOS, i.e. the
Financial Ombudsman Service (Australia). FOS gets around thirty thousand complaints every
year. The second one is CIO, i.e. the Credit and Investment Ombudsman, which for the year of
2015-16 got 4,769 complaints (CIO, 2016). CIO and FOS are both nongovernmental and not for
profit organizations which are funded through the members, included in which are the financial
advisers, banks and the other financial service providers. So, there is a major self regulatory and
private element in the banking regulators (Pearson, 2009). ASIC basically administers and
enforces a number of legislative provisions which are related to financial products, financial
markets and the financial sector intermediaries. The goal is to safeguard the consumers and
market from unfair practices, manipulation and deception, whereby the confident participation in
financial system by the consumers and investors is promoted (Reserve Bank of Australia, 2018).
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