The Murray Inquiry into the financial system released a large number of submissions that it received as part of its inquiry on Friday and the submission from Australia’s prudential regulator, APRA, is a must-read.
One of the paragraphs that jumps out early in APRA’s submission is the one which might explain recent complaints from major bankers such as the ANZ’S Graham Hodge as to APRA’S strong approach to the implementation of the Basel III capital and liquidity reforms.
APRA is clearly proud that it has “gained a reputation as a robust and determined prudential regulator. Indeed, as APRA sees it, its most enduring contribution to the resilience of regulated institutions during the crisis came from its efforts to promote their financial health prior to the crisis.”
APRA goes further to empathise why it is so tough on the banking sector, noting:
As the IMF has noted,
‘[p]rudential supervision is most valuable when it is least valued; restricting reckless banks during a boom is seldom appreciated but may be the single most useful step a supervisor can take in reducing failures.’
This is a core lesson that APRA has taken to heart.
Indeed they have, as their strident interpretation of the new global regulatory regime suggests.