The big picture is six months hold for all the regulatory changes but remediation is full steam ahead.
CoFR 23/3/20: “APRA and ASIC indicated that they would shortly announce further plans to reprioritise their regulatory work and reduce the regulatory burden facing institutions in this difficult time.”
APRA 23/3/20: “APRA is therefore suspending all substantive public consultations and actions to finalise revisions to the prudential framework that are currently underway or upcoming, including consultations on prudential and reporting standards. It will keep the situation under review, but presently does not plan to recommence consultation on any non-essential matters before 30 September 2020.”
“APRA is also reconsidering the implementation dates and transition timeframes for prudential and reporting standards that have been recently finalised but not yet implemented. Further details on any adjustments will be provided shortly.” [CPS 234 is one that we are aware of.]
ASIC 23/3/20: “Until at least 30 September 2020, the other matters that ASIC will afford priority are where there is the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters.”
“ASIC has immediately suspended a number of near-term activities which are not time-critical. These include consultation, regulatory reports and reviews, such as the ASIC report on executive remuneration, updated internal dispute resolution guidance and a consultation paper on managed discretionary accounts.”
However the focus grows on remediation: “ASIC will also work with financial institutions to further accelerate the payment of outstanding remediation to customers.”
An opportunity to review priorities
Clearly this is an opportunity for the regulatory teams in insurers and distributors to take a deep breath and have a look at priorities. It does not mean ‘down tools’ but it does mean that people committed to these projects can be redeployed to more pressing activities if needed.
Our suggestion, and the approach we are taking ourselves, is to continue workstreams but be satisfied with a slower pace, and particularly to postpone interactions with other parts of the business that are busy elsewhere because of the COVID-19 disruption.
Vulnerable customer responses should not be postponed, though. If anything it makes sense to try to accelerate it. The very nature of the COVID-19 creates whole hosts of newly vulnerable customers. Even if new policies and procedures are not yet in place, actions will be judged through the lens of those expectations.
It is heartening to hear that some insurers have quickly adapted to social distancing edicts by using tech-enabled tools such as virtual / video assessing processes to minimise face-to-face interaction with customers while still serving their needs.
Does this change the post-Hayne world?
The Royal Commission demanded a whole different approach to customers from the financial services sector. We now have a public health problem rapidly turning into an economic and community crisis.
It will be interesting to observe how these two forces play out over the next two years. Of course we can’t predict the progress of the COVID-19 disruptions, but our planning assumption is that activity will be constrained for the next six months.
Will government, media, consumer groups and the public have different expectations or priorities after we get through COVID-19? It is very doubtful that any of the reforms will be stopped, but possibly the degree of enthusiasm and relative priorities of the regulators may be different.
It is hard to imagine a more serious first up opportunity for financial institutions to demonstrate they have taken heed of the lessons delivered by Hayne than the present COVID-19 situation. No doubt once we see the other side of this crisis there will be time for further reflection on this.
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