February 21, 2019

IMF published the results of its financial sector assessment for Australia in the form of a consolidated financial system stability assessment (FSSA) report and several technical notes. APRA welcomed the IMF Financial Sector Assessment Program (FSAP) report on Australia. The assessment concluded that the Australian financial system has been further strengthened since the previous assessment of IMF in 2012. The 2018 FSAP underscores the strength and resilience of the Australian financial system.

APRA published the following reports and technical notes as part of the 2018 FSAP evaluation on Australia:

  • Report on Financial System Stability Assessment
  • Report on Detailed Assessment of Observance of the Basel Core Principles For Effective Banking Supervision (BCP)
  • Technical Note on Systemic Risk Oversight and Macro-prudential Policy
  • Technical Note on Regulation and Supervision in Insurance Sector
  • Technical Note on Supervision, Oversight and Resolution Planning of Financial Market Infrastructures (FMI)
  • Technical Note on Stress Testing the Banking Sector and Systemic Risk Analysis
  • Technical Note on Bank Resolution and Crisis Management

Under the FSAP review, APRA was subject to a comprehensive assessment of its supervisory approach and capabilities in banking and insurance supervision. IMF also assessed the adequacy of systemic risk oversight by APRA and other members of the Council of Financial Regulators, the crisis preparedness, and the financial safety nets. Overall, the IMF assessment concluded the following:

  • Australia benefits from a robust regulatory framework and its prudential supervision shows generally high conformity to international best practices, but with opportunities to further strengthen certain practices.
  • Bank capital requirements have been raised and applied more conservatively than minimum Basel standards; furthermore, the Australian authorities have taken welcome steps to further strengthen the resilience of banks through stress testing programs.
  • Bank solvency appeared resilient to stress based on the own stress testing exercise of IMF, with the results broadly in line with stress testing undertaken by APRA.
  • Policy action has lowered financial stability risks in the banking system through the introduction of stronger lending standards, including the temporary restrictions on the growth of investor loans and the share of interest-only mortgages.
  • APRA has undertaken a comprehensive reform of the prudential regulation for insurance companies, while improving the consistency of the framework between life and general insurers since the last assessment of IMF in 2012.


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Keywords: Asia Pacific, Australia, Banking, Insurance, PMI, FMI, BCP, Systemic Risk, Stress-Testing, Basel III, Bank Resolution, Macro-Prudential Policy, FSAP, FSSA, IMF, APRA


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