Treasury releases new reforms to give APRA extra powers
(14 September 2012 – Australia) The Australian Prudential Regulation Authority (APRA) could gain the power to sack the boards of foreign-owned banks operating in Australia in times of crisis under new reforms released by the government.
While APRA can take control of foreign banks that take retail deposits, such as HSBC and Citi, it does not have the power to appoint its own management to foreign banks that focus on other markets.
Under current rules, foreign banks cannot accept retail deposits of less than A$250,000 via branches and are mostly confined to wholesale markets and commercial lending.
The A$1.4 trillion superannuation industry could also face tougher restrictions, with the proposed rules letting regulators remove individual trustees or directors who threaten financial stability.
The extra powers would be used only in serious circumstances. Most of the time, APRA expects it would rely on local management following its instructions without the need for the board to be replaced.
However, it said in times of crisis it might need extra powers because its orders could be ignored.
''There is a growing recognition internationally that foreign ADIs [authorised deposit-taking institutions] have the potential to transmit financial shocks to the host system in which they are operating,'' a discussion paper released by Treasury on Wednesday said.
Of the 48 foreign banks operating in Australia, Treasury said 39 were operated through a branch structure, with A$297.6 billion in assets. The rest, with A$110.6 billion in assets, were subsidiaries of global firms.
Under current rules, foreign banks cannot accept retail deposits of less than A$250,000 via branches and are mostly confined to wholesale markets and commercial lending.
The A$1.4 trillion superannuation industry could also face tougher restrictions, with the proposed rules letting regulators remove individual trustees or directors who threaten financial stability.
The extra powers would be used only in serious circumstances. Most of the time, APRA expects it would rely on local management following its instructions without the need for the board to be replaced.
However, it said in times of crisis it might need extra powers because its orders could be ignored.
''There is a growing recognition internationally that foreign ADIs [authorised deposit-taking institutions] have the potential to transmit financial shocks to the host system in which they are operating,'' a discussion paper released by Treasury on Wednesday said.
Of the 48 foreign banks operating in Australia, Treasury said 39 were operated through a branch structure, with A$297.6 billion in assets. The rest, with A$110.6 billion in assets, were subsidiaries of global firms.
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