Issue 739, 26 February 2020
In this issue:
- Financial risks from climate change: APRA proposes new guidance
- Superannuation Guarantee amnesty bill passed
- Options to prevent wage underpayments: consultation
- Enduring powers of attorney: consultation
Financial risks from climate change: APRA proposes new guidance
APRA has written to all its regulated entities to highlight concerns regarding the financial risks and opportunities arising from climate change, and its plans to issue new regulatory guidance on this issue later this year.
The letter indicates that APRA intends to develop and consult on a climate change financial risk prudential practice guide (PPG). This is not intended to establish new obligations, but rather will be designed to assist entities in complying with their existing prudential requirements, including those found in Prudential Standard CPS 220 Risk Management.
The new cross-industry PPG, relevant to all entities, will set out APRA’s views on better practice and outline prudent practices in this area. It will cover areas relevant to the prudent management of climate change financial risks—aligned with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures—including aspects of governance, strategy, risk management, metrics and disclosure.
The guidance will be informed by APRA’s engagement with other regulators domestically and internationally, as well as its ongoing engagement with industry participants. APRA will consult on the draft PPG in mid-2020 and is aiming to publish final guidance before the end of the year.
Separately, APRA will be seeking to undertake a climate change financial risk vulnerability assessment, commencing with Australia’s largest authorised deposit-taking institutions (ADIs). The ADI vulnerability assessment will be designed in 2020 and executed in 2021, with other industries to follow. The vulnerability assessment will involve entities estimating the potential physical impacts of a changing climate, including extreme weather events, on their balance sheet, as well as the risks that may arise from the global transition to a low-carbon economy.
In addition, APRA will be updating its existing prudential standard SPS 530 Investment Governance and the related practice guide (SPG 530), in response to industry views outlined in the post-implementation review of the superannuation prudential framework (see ASFA Action issues 707, 681, 679 and 672 for background). APRA will consult on specific changes to SPS 530 and SPG 530 around the middle of the year, in conjunction with other changes to the superannuation prudential framework as part of APRA’s response to the post-implementation review.
Superannuation Guarantee amnesty bill passed
Parliament has passed the Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020 without amendment.
The Bill will implement a one-off 12-month amnesty to encourage employers to self-correct historical Superannuation Guarantee non-compliance. The amnesty will expire six months after the Bill receives Royal Assent.
See ASFA Action issue 722 for details about this Bill.
Options to prevent wage underpayments: consultation
The Government has released a discussion paper on reform options to strengthen the existing civil compliance and enforcement framework to help deter wage underpayments and non-compliance.
The Government has indicated it will shortly introduce legislation to criminalise the most serious forms of deliberate worker exploitation and wage underpayments and introduce significant jail terms and fines.
To complement that work, the Government is also considering options to strengthen the existing civil compliance and enforcement framework within the Fair Work Act 2009, to help deter other types of wage underpayments and non-compliance that do not meet the threshold of criminal conduct.
These options are outlined in a discussion paper, Improving protections of employees’ wages and entitlements: further strengthening the civil compliance and enforcement framework.
The paper also asks whether:
- the courts should be given greater powers to disqualify directors of companies where significant underpayments occur, issue banning orders, or issue adverse publicity orders that force companies to disclose or publish their offences
- existing mechanisms such as the small claims processes available through the Federal Circuit Court and State and Territory courts could be streamlined to encourage greater participation and at reduced costs
- a formal role should be conferred on the Fair Work Commission to help mediate and conciliate in disputes between employers and employees, as a way of delivering faster and cheaper outcomes.
The Attorney-General’s Department is seeking submissions on the discussion paper by 3 April.
Enduring powers of attorney: consultation
The Government is consulting on possible interventions to streamline access to information about enduring powers of attorney (EPOA) and reduce the uncertainty regarding whether a document, as presented, can be relied upon as the basis for financial transactions.
Financial institutions, including superannuation funds, can have concerns in relation to when an EPOA can be relied upon to make a financial transaction or decision. EPOAs are governed under state-based rules and there is no easily accessible, nationally consistent, source of data which organisations can use to determine if an EPOA is current and valid.
The Attorney-General’s Department has released a consultation regulation impact statement, Enhancing protections relating to the use of Enduring Power of Attorney instruments. This sets out three options for addressing these concerns:
- maintain the status quo, with no changes to current regulatory frameworks
- a regulatory option, proposing the introduction of a mandatory registration requirement in order to establish a comprehensive, national data source able to be searched by approved third parties to confirm the existence and currency of the EPOA
- a non-regulatory option, under which the Australian Government would facilitate registration of EPOAs in a central location, with registration being voluntary.
The Attorney-General’s Department has indicated it is continuing to work with states and territories, through the Council of Attorneys-General, to identify areas where current state and territory legislation can be amended to create greater consistency across borders and enhance transparency of EPOA documents which support financial transactions.
The Government notes that the proposal to develop a national register is in line with recommendations made by the Australian Law Reform Commission.
The Attorney-General’s Department is seeking submissions by 9 March.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
