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The banking watchdog is too secretive, “unwilling to challenge itself” and slow to respond to problems, with an independent report demanding a major shake-up.

The review slams the Australian Prudential Regulation Authority for its low profile and slow decision making, and calls for an overhaul of its organisational structure.

But APRA’s chair Wayne Byres insists his organisation is already changing, and he played down concerns about the culture that allowed banks to rip off Australian customers.

Former consumer watchdog boss Graeme Samuel led the review after the regulator was slammed in the banking royal commission.

“APRA appears to have developed a culture that is unwilling to challenge itself, slow to respond and tentative in addressing issues that do not entail traditional financial risks,” the report says.

“There are good reasons for a prudential regulator to be discreet, particularly in cases of acute financial stress.

“However, APRA needs to shift the dial towards a more strategic and forceful use of communication to ensure that it maximises its impact with regulated entities.”

The report also says a division entirely focused on superannuation is needed, to oversee how the system performs for its members.

Mr Byres said APRA was already dealing with changes, but argued the organisation needs more funding if it is to handle the expectations of the community.

“It does quite fairly make the point that we have more to do. We need to go further and faster in many areas,” he told reporters on Wednesday.

Anonymous staff told the review that APRA should be more forceful in taking on financial institutions, and others felt like managers wouldn’t back them, but Mr Byres played down those concerns.

“Getting the range of comments that you see here, it’s not unexpected, there’s always a range of views in APRA,” he said.

Centre Alliance senator Rex Patrick told Sky News Mr Byres should step down from his role after five years in charge.

All of the 24 recommendations have been accepted, including 19 for the regulator and five directed towards government.

Recommendations for the government include reviewing the adequacy of APRA’s penalties and giving it the power to appoint someone to undertake reviews.

Treasurer Josh Frydenberg says the report found APRA was an “impressive and forceful” regulator for traditional financial risks.

“However, the review has also identified important changes to ensure that APRA is well positioned to respond to an environment of growing complexity and emerging risks for APRA’s regulated sectors,” Mr Frydenberg said.

Shadow treasurer Jim Chalmers says the recommendations are a step in the right direction, but more needs to be done right across the board to restore confidence in the finance sector.