The Australian Prudential Regulation Authority expressed its support for a proposed bill that would strengthen its crisis resolution powers to manage the failure of authorized deposit-taking institutions, or ADIs, and insurers in an orderly fashion.
ADIs include banks, building societies and credit unions, according to APRA.
The reforms are part of a proposed bill, the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017, which seeks to broaden the regulator's crisis management power and will allow it to intervene in failing banks and insurers.
Under the proposed bill, APRA will be able to take control of a group entity, rather than just its regulated subsidiary, in the event of a financial crisis. The expanded powers will help APRA limit the type of contagion effects that could hinder the ability to resolve the regulated institution, the regulator said in a submission to the Senate's Economics Legislation Committee, which is reviewing the bill.
The bill will also bring foreign branches under similar supervision as domestically incorporated institutions, such that APRA will be able to appoint a statutory manager to the Australian branch of a foreign financial company or wind up or transfer the business of the Australian entity if the branch or its foreign parent comes under financial distress.
Further, the bill strengthens the immunity of an an institution, its directors, management, employees and agents from potential breaches under separate laws, including those under the Corporations Act, when complying with directions issued by APRA during the resolution of a crisis. APRA said the amendments would allow it to resolve a distressed company in a more timely and decisive way.
The proposed changes are part of a government overhaul that aims to ensure that large financial corporations can be dismantled in the event of a collapse, and are not bailed out by taxpayers' money, The Australian reported Dec. 27.