Our approach to enforcement and resolution

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Our Statement of Prudential Policy

Information on our risk-based approach to enforcement and resolution.

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Enforcement

Where appropriate, we investigate non-compliance and take enforcement action. We take a risk-based approach to ensure our enforcement resources have the most impact. We prioritise the issues that are likely to have a greater bearing on our objectives or support our credibility as a regulator and achieve appropriate supervisory outcomes.

Our
Statement of Prudential Policy sets out our approach to enforcement and resolution.

Our Enforcement Framework

Our Enforcement Framework sets out how we select matters for investigation, conduct investigations and ultimately take decisions relating to enforcement matters.

More information about our Enforcement Framework

Resolution and crisis management

We do not run a zero-failure regime — we allow regulated entities to fail where the risks to the financial system are understood and can be managed.

Planning for resolution

We develop policies and procedures for the recovery and resolution of distressed entities — for example, Open Bank Resolution (OBR).

We plan and coordinate with other organisations with interests in recovery and resolution matters — both domestically and overseas.

We consider a broad range of issues including avoiding significant damage to the financial system.

More information about resolution

Our regulatory response model for enforcement and resolution

This diagram shows our regulatory response model for enforcement and resolution.

At the top of the diagram is a black arrow pointing left to right representing increasing severity of stress.

On the left is a white box with the heading ‘normal supervision’ – the text underneath says we undertake supervisory activities in a risk-based forward-looking way to support stakeholders in meeting our regulatory expectations on an ongoing basis.

If there are compliance concerns, there are measures we take to restore regulatory compliance from least severe to most severe:

Heightened supervision – where non-compliance is repetitive or more serious, we will increase intensity of supervision to proactively address issues (e.g. private warnings).

Regulatory response – for prevalent or severe non-compliance, formal actions may be considered (e.g. public warning, directions, changes to license conditions).

Court response – civil or criminal actions for serious breaches.

If there are financial concerns, there are measures we take to address financial concerns:

Early detection and diagnosis – the intensity of supervision will increase. We may set additional reporting requirements, and use of information gathering and investigatory powers.

Recovery – we engage with firms on the measures they take to address their financial concerns. For significant or severe concerns, formal actions may be considered (e.g. directions, changes to license conditions).

On the right is an orange box with the heading ‘Insolvency/resolution’ – the text underneath says should the firm reach the point of non-viability; more drastic action would be required. A firm may be placed into statutory management or liquidated. For pre-positioned banks, the OBR policy may be implemented as part of the statutory management. NBDTs may be placed into receivership by their statutory supervisor.