APRA has set out its policy and supervision priorities for the next 12 to 18 months, with an emphasis on fulfilling the strategic goals of its Corporate Plan. These goals are maintaining financial system resilience, improving outcomes for superannuation members, improving cyber-resilience in the financial sector, and transforming governance, culture, remuneration, and accountability (GCRA) across all APRA-regulated institutions. Additionally, while speaking at the Chair Forum of the Investment Magazine, the APRA Deputy Chair Helen Rowell presented the policy and supervisory agenda for superannuation sector in 2020.
Consistent with the previous years, the policy priorities of APRA offer a forward view of planned changes to the prudential framework. Among the key cross-industry policy priorities for 2020 are initiatives aimed at driving improvements in GCRA, including finalizing a more robust prudential standard on remuneration, and updating prudential standards on governance and risk management. Additionally, as flagged in the APRA Insight last month, APRA intends to roll out a new prudential risk rating system to replace its long-standing Probability and Impact Rating System and Supervisory Oversight and Response System (also known as PAIRS and SOARS models) mid-year. APRA will also work closely with the Treasury and the Australian Securities and Investments Commission in expanding the Banking Executive Accountability Regime (BEAR) to the insurance and superannuation sectors. The other key policy priorities include the following:
- Strengthening crisis preparedness, including the development of a new prudential standard on resolution and recovery planning
- Completing the current review of the capital framework for authorized deposit-taking institutions to implement unquestionably strong capital ratios and the Basel III reforms
- Progressing a range of enhancements recommended by the post-implementation review of the original superannuation prudential framework introduced in 2013
- Continuing work on strengthening the capital framework for private health insurers
Accompanying the policy priorities are the supervision priorities of APRA, which outline how the supervision function will be directed toward significant risks in the financial system and actions to ensure that these risks are well-managed and mitigated. In the supervision arena, the following are the key priorities for 2020:
- Maintaining financial resilience, including through increased focus on recovery and resolution planning and stress testing
- Conducting a range of GCRA-related supervisory reviews and deep dives and using entity self-assessments to drive greater accountability
- Encouraging under-performing superannuation funds to urgently improve member outcomes or exit the industry
- More closely assessing institutions’ capability to deal with emerging and accelerating risks, such as cyber-security and climate change
Keywords: Asia Pacific, Australia, Banking, Insurance, Pensions, Superannuation, Policy Priorities 2020, Supervision Priorities 2020, GCRA, Corporate Plan, Basel III, BEAR, Resolution Framework, Operational Risk, APRA
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