The Australian Prudential Regulation Authority (APRA) has been urged to call a spade a spade instead of seeking to hide its intentions behind forms of words on regulatory matters.
The admonition is contained in an Association of Superannuation Funds of Australia (ASFA) submission to APRA in response to the release of a discussion paper on prudential guidance issued to superannuation funds.
In its submission, ASFA points out that in various places in the prudential practice guidelines (PPG) the regulator uses such as ‘APRA expects', ‘it would be prudent practice', ‘best practice' or ‘the following would normally be applied'.
The submission said the use of such terminology "would appear to be somewhat inconsistent with the statement elsewhere in the discussion paper that "PPGs do not contain enforceable requirements".
"ASFA has interpreted the use of the above words as signifying: There are certain matters on which APRA has strong views and would perhaps have liked to have seen included in the prudential standards but, for a range of reasons (including industry views), has decided it is more appropriate to incorporate them into the PPGs," the submission said.
"There is both an internal and an external audience for the PPGs. PPGs provide guidance to both the industry and APRA staff. To this extent, Registrable Superannuation Entity (RSE) licensees can expect APRA frontline supervisors to take a particular interest in matters where the above terminology is used.
"With respect to those matters where the words ‘APRA expects' are used, ASFA's view is that, as there are no enforceable requirements, where an RSE licensee's process does not accord with the APRA expectation, it should be sufficient for an RSE licensee to be able to evidence: an acknowledgment and consideration of the APRA expectation; and an alternative justified position," the ASFA submission said.
