There was just one set of eyes supervising AMP as it perpetrated some of the most scandalous financial behaviour in the country, the prudential regulator has admitted.
AMP has estimated that it will need to pay $778 million in remediation programs over the next three years, largely due to charging customers fees-for-no-service, while another possible scandal in its corporate superannuation arm may push that figure to $1 billion.
Its bad behaviour combined with the other big banks has led to the suggestion that the regulators, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA), were asleep at the wheel.
The latter’s chairman Wayne Byres, as the last witness called during the final public hearing of the royal commission admitted that, while not completely asleep, APRA may be entirely under-resourced.
“I would guess that for AMP Super we might have the equivalent of one [full-time employee] devoted to AMP Super,” he told the commission.
To put that in perspective, just one APRA officer was left in charge of one of Australia’s largest superannuation funds, with AMP Super controlling $52 billion in assets and servicing around 2.9 million members.
“There’s a limit what that person, or what one person can do and so the focus tends to be on the frameworks and policies looking robust,” Byres continued. “In this particular case, the application of that framework was not what one would suspect it to be.”
It seems AMP was not a standalone case either, where an underresourced APRA was simply unable to enforce the rules with offenders like the Commonwealth Bank (CBA).
“I would say it’s the same in a case like CBA where the framework and policies looked good but the audit and compliance functions weren’t necessarily alerting or raising issues up,” Bryes explained.
“In mortgages, there are many fine mortgage lending policies out there but they weren’t all necessarily being followed when people were making lending decisions.”
“It’s an example of that general issue which we will have to think harder about how to respond to,” Byres concluded.
How the regulators manage to enforce the rules going forward remains unclear, as does what Commissioner Kenneth Hayne recommends in the final report to be handed down in February.
Look back at Your Money’s coverage of the final royal commission hearings at www.yourmoney.com.au/royal