ASFA warns of moral hazard in APRA levy
A moral hazard may flow from funding financial services regulators such the Australian Taxation Office (ATO), the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) by way of a levy, according to the Association of Superannuation Funds of Australia (ASFA).
The warning of the potential for moral hazard has come at the same time as ASFA has noted that the total cost of financial services supervisory levies in the current financial year has risen from $134 million to over $180 million.
In a submission filed as part of an Australia National Audit Office review of such arrangements, ASFA made clear it believed there needed to be greater accountability with respect to the justification for the levies and the manner in which they were used.
It said this accountability was necessary in circumstances where the quantum of the levies would have otherwise been attributed to superannuation fund member accounts.
On the question of moral hazard, its submission said that it evolved from "the party which is providing the funding (industry) having no control over the resourcing decisions made by the agency".
"This extends to the type, and in particular the scope, of activities engaged in by the agency and the quantum, and nature, of the resources used," the submission said.
"As such, there is little in the way of effective oversight, checks and balances and controls to ensure that the activities performed, the resourcing utilised and the resultant costs incurred are appropriate and reasonable," it said.
The submission argued that the usual process with respect to funding required rigour which necessitated having to perform a cost/benefit analysis and preparing a business case, "thereby imposing a fiscal discipline on the party concerned".
"If costs can simply be recovered by the imposition of a levy, the agency is relatively unconstrained as to the approach it can take, the scope and size of any project/activity and accordingly the costs it incurs," the ASFA submission said.
"Accordingly, the industry holds significant concerns about the absence of information with respect to the costs being recovered by the levies," it said.
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