John Laker is the Chairman of APRA: he is in charge of banks, building societies, credit unions, insurance companies, superannuation funds and friendly societies.
In this interview in the Company Director Journal he explains his approach to corporate governance:
"There were three main lessons to come out of the HIH episode and one
was the importance of having a regulatory framework that gave APRA the
power of intervention," says Laker.
"The second lesson was for us to have a more effective radar to pick up
early warning signals. This meant building up our ability to assess
risk.
"The third lesson was that APRA was just too thinly staffed on the
front line. We benchmarked ourselves against comparable regulators and
it showed we were at the light touch end and this is not where the
Government or the community expected us to be."
"Our approach starts out by looking at the deposit taking sector as a
whole," Laker says. "It doesn’t divide it into listed and unlisted. We
look at the principles of prudent management of the institutions in
that sector and the standards we believe should be in place.
"In developing new standards we look at what is in place including the
Corporations Act and the ASX Corporate Governance Principles. We
clearly have regard to what other regulators require but we are the
only regulator charged with promoting sound and prudent behaviour that
protects people’s money or their assets.
"The clear mandate we have been given by Parliament is that the
standards of prudent behaviour are to be higher than in other sectors.
We have full regard for the Corporations Law and the ASX guidelines but
in the APRA regulated sector we make no apologies for the fact that we
set our standards at the higher end.
"That’s what the prudential regulator’s mandate is and that’s what
Parliament expects us to do. But clearly how we go about implementing
those standards require us to be careful."
In respect of directors’ independence: "If a board believes that a director is not independent but there are
other reasons why that person should be treated as independent, we
simply want them to run the ‘if not, why not’ arguments past us and
persuade us.
"In the first instance a board relies on shareholders to provide
discipline. The difficulty for us is that the majority of our companies
are not listed and not subject to the ASX guidelines. Therefore the
depositor or policy holder doesn’t have the opportunity to vote.
"In almost all circumstances that I can envisage the ASX guidelines and
what we require will dovetail very straightforwardly. But there may
well be special cases and we will have to wait and see what arguments
are put to us."
"If an entity wishes to depart from the ASX guidelines and put up an
"if not, why not" reason they would have to have a pretty good argument
to win over shareholders. In the long term you would think the
interests of shareholders and depositors would coincide. But what may
well be very good for shareholders in the short term may not be good
for depositors and that’s where there are natural tensions."
