‘Quis custodiet ipsos custodes’ - or FRAA for short?



Australia Publication July 2021

This article was co-authored with Andrew Mitchell.


The piercing Roman satirist, Juvenal, might not readily spring to mind for followers of Australian financial regulation – but his famous dictum (Who will guard the guards themselves?) might well apply to the new Australian Financial Regulator Assessment Authority (FRAA). The Bill establishing the FRAA received its assent at the end of June 2021.

So, there’s a new oversight agency in the already rather crowded financial and markets regulatory arena. Why? And, so what?

Hayne recommendation

Kenneth Hayne recommended a new independent oversight authority for APRA and ASIC – to assess how effectively each regulator meets its objectives and how well leaders and decision-makers within the regulators perform.

In fact, Hayne’s recommendation tracked a similar view expressed by the Murray Inquiry in 2014. Hayne noted the limitations of government oversight of regulator performance – time constraints, lack of deep expertise, topic complexity – and set out a blueprint for regulator oversight that the enabling Act has broadly followed.

Over time, the oversight authority should develop a comprehensive list of items against which each agency’s performance is evaluated Commissioner Hayne

Important drivers for this recommendation are the importance and size of ASIC’s remit and the significance of APRA’s work to strengthen Australia’s financial system and the interconnectedness of both regulators’ work. Simply put, the responsibilities of these agencies are so important to the country that they both need professional and effective appraisal.

Important FRAA features

Central to the Act is the requirement for FRAA to assess, once every 2 years, the effectiveness and capability of each of APRA and ASIC and to report to the relevant Minister (currently the Treasurer). Also, the Minister can request an assessment on any matter relating to APRA’s and ASIC’s effectiveness.

Other noteworthy provisions include an obligation on APRA and ASIC to co-operate with FRAA and the wide information gathering powers that FRAA can exercise. Interestingly, legal professional privilege does not excuse failure to disclose information under those powers.

There will be three appointed members of FRAA (yet to be announced) who will be supported by Treasury staff.

Treasurer statement

The Treasurer welcomed the passing of the FRAA Act and the implementation of the FRAA recommendation from the Banking Royal Commission.

In doing so, he noted the assistance that FRAA can give to the new ASIC leadership as it seeks to identify the priorities that matter for the financial system, particularly in a period of transformation and change in the sector. This might suggest that FRAA is intended to be an active, rather than a passive, agency.

In its first year, the FRAA will be tasked with assessing the effectiveness and capability of ASIC so as to assist newly appointed ASIC Chair Joseph Longo in ensuring ASIC is operating consistently with the Government’s Statement of Expectations and is supporting Australia’s economic recovery from the COVID-19 pandemic. Josh Frydenberg, Treasurer


Firms regulated by ASIC and APRA may well ask whether this regulatory development matters.

Given the importance for regulated businesses to consider their regulatory strategy, to address the key risks they run in their interactions with regulators, and to manage the way they conduct any relationship they have, working out how the FRAA might influence ASIC and APRA makes good sense.

FRAA’s approach and the matters it focuses on will inevitably have some impact on the way ASIC and APRA conduct themselves. The set-up of an oversight agency like FRAA is quite unique in the global regulatory world – no parallel bodies seem to exist in other developed jurisdictions– so it is quite likely that FRAA’s involvement will have an impact on regulator activity and priorities.

Anticipating how regulators might react to conduct, operational or compliance issues and other forms of non-financial risk is a key element for any regulator response or affairs team. And we can expect FRAA to be central (at least initially) to how regulators react to these risks.

It is also possible that other key regulators in other sectors (in particular, those that attract major public interest) will come under similar oversight in the future.

This could be a trend - watch out for those guards.

Recent publications

Subscribe and stay up to date with the latest legal news, information and events...