APRA takes enforcement action against RACQ over risk governance weaknesses
The prudential regulator has ordered RACQ to develop a program to improve its risk governance as part of enforcement action taken against the Queensland-based member-owned motoring club.
The Australian Prudential Regulation Authority (APRA) says the enforcement action applies to RACQ Insurance and RACQ Bank.
APRA says a review it conducted this year uncovered “significant weaknesses” in RACQ’s risk governance framework.
Areas of concerns listed by the prudential review include risk and compliance framework and practices, capability and capacity challenges within the risk functions, unclear accountabilities and an immature risk culture.
The enforcement action requires RACQ to develop and implement a comprehensive, APRA-approved, risk transformation program.
“We expect APRA-regulated entities to have strong risk governance in place and we are disappointed with the current deficiencies identified within RACQ,” Deputy Chair Helen Rowell said.
“We will not hesitate to require action and highlight publicly, where appropriate, when entities do not meet these expectations.”
APRA says in addition to the risk transformation program, RACQ must engage a third party to provide independent assurance over the delivery of the changes made and provide periodic reporting to the regulator.
RACQ is required as well to assign accountability under the Banking Executive Accountability Regime for successful delivery of the risk transformation program to an appropriate, named executive.
Group CEO David Carter says an independent firm with expertise in risk management has been engaged to review RACQ’s activities and identify opportunities for improvement.
“This review is underway, along with the development of an action plan that will outline RACQ’s roadmap for improving its risk management approach,” Mr Carter said in a statement in response to APRA’s enforcement action.
He says the work will continue into the 2023/24 financial year and is subject to approval and oversight by APRA and the Australian Securities and Investments Commission (ASIC).
In June RACQ had announced a systems and processes investment plan after self-reporting a regulatory breach to ASIC.
The breach related to premium discounts and how some of the wording in product disclosure statements was inadequate in describing the pricing application. And in August RACQ said that it expects to refund $200-220 million to members.
