Featured Product

    APRA on Industry Self-Assessments into Governance and Accountability

    May 22, 2019

    APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA). The Prudential Inquiry report on CBA was published in May 2018. The paper discusses the outcomes of the self-assessment process, key findings and common themes, and the solutions being implemented by institutions. The paper also outlines the next phase of APRA workstreams to strengthen prudential expectations and intensify supervision of governance, accountability, and culture.

    The Prudential Inquiry was launched following a series of significant operational and governance shortcomings that damaged the reputation of CBA. The report found that continued financial success of CBA had dulled the institution’s senses, especially with regard to the management of non-financial risks. APRA wrote to the institutions’ boards last June asking them to gauge whether the weaknesses uncovered by the CBA Prudential Inquiry also existed in their own companies. In addition, APRA wrote to the boards of 36 authorized deposit-taking institutions, insurers, and superannuation licensees asking them to conduct a self-assessment against the findings and provide that assessment to APRA. APRA has since examined these self-assessments to assess their quality, identify common themes, and, where necessary, challenge institutions’ findings. Overall, it is clear that the weaknesses identified in the final report of the Prudential Inquiry are not unique to CBA. A number of common themes have emerged from the self-assessments, including:

    • Non-financial risk management requires improvement
    • Accountabilities are not always clear, cascaded, and effectively enforced
    • Acknowledged weaknesses are well-known and some have been long-standing
    • Risk culture is not well-understood and, therefore, may not be reinforcing the desired behaviors

    The paper highlights that significant uplift is required across industries to bring governance and the management of non-financial risks to an appropriate standard. This includes embedding robust frameworks that incentivize delivery of sound outcomes, proactive management of issues, and consistent application of rewards and consequences. Over the next 12 months, APRA will strengthen prudential expectations and increase supervisory intensity for governance, accountability, and culture for all regulated institutions.

    APRA is meeting with participating institutions and, as a next step, will be writing to the boards of each of the 36 institutions to provide feedback on their self-assessments and outline the intended targeted supervisory engagement by APRA. The nature of this engagement will depend on the quality and findings of the self-assessment and the risk profile of the institution. For some institutions, the issues identified in the self-assessment are material and the changes required to address them are significant. APRA is, therefore, considering applying an additional operational risk capital requirement to reflect the higher risk profile of these institutions. Many institutions that conducted a self-assessment have developed plans to address the findings. APRA expects all regulated institutions to identify and address points of weakness and continues to encourage institutions that have not yet completed a thorough self-assessment to do so. Institutions should consider the observations in this information paper when designing and implementing steps to enhance risk governance.

     

    Related Links

    Keywords: Asia Pacific, Australia, Banking, Insurance, Superannuation, Governance, Self-Assessment, Prudential Inquiry, Accountability, Operational Risk, APRA

    Related Articles
    News

    APRA Publishes Proposal to Increase Transparency of Banking Data

    APRA proposed to substantially increase the volume and breadth of data it makes publicly available on authorized deposit-taking institutions, including banks, credit unions, and building societies.

    December 05, 2019 WebPage Regulatory News
    News

    ESMA Consults on Guide to Internal Controls for Credit Rating Agencies

    ESMA launched a consultation on the guidelines on internal controls for credit rating agencies (CRAs).

    December 05, 2019 WebPage Regulatory News
    News

    EU Finalizes Directive and Prudential Rules for Investment Firms

    EU published, in the Official Journal of the European Union, the Directive (2019/2034) and Regulation (2019/2033) on the prudential requirements and supervision of investment firms.

    December 05, 2019 WebPage Regulatory News
    News

    OSFI Revises Guideline on Principles for Management of Liquidity Risk

    OSFI finalized Guideline B-6 on the principles for the management of liquidity risk.

    December 05, 2019 WebPage Regulatory News
    News

    PRA Consults on Framework to Manage Outsourcing and Third-Party Risk

    PRA published a consultation paper CP30/19 that sets out proposals to modernize the regulatory framework on outsourcing and third-party risk management.

    December 05, 2019 WebPage Regulatory News
    News

    BoE, PRA, and FCA Consult to Strengthen Operational Resilience

    BoE, PRA, and FCA published a shared policy summary and coordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector.

    December 05, 2019 WebPage Regulatory News
    News

    EC Amends Rule on Mapping of External Credit Assessment Institutions

    EC published the implementing regulation (EU) 2019/2028, which amends Regulation 2016/1799, regarding the mapping tables specifying correspondence between the credit risk assessments of external credit assessment institutions (ECAIs) and the credit quality steps set out in the Capital Requirements Regulation.

    December 04, 2019 WebPage Regulatory News
    News

    EBA Issues Second Part of Advice on Implementation of Basel III in EU

    EBA published the second part of its advice on the implementation of Basel III in EU, which complements the report published on August 05, 2019.

    December 04, 2019 WebPage Regulatory News
    News

    EU Approves European Council Proposal on CCP Recovery and Resolution

    EU ambassadors approved the position of European Council on a proposed framework for clearing houses and their authorities to prepare for and deal with financial difficulties.

    December 04, 2019 WebPage Regulatory News
    News

    OSFI Releases Guideline on Foreign Bank Branch Deposit Requirements

    OSFI released the final version of Guideline A-10 on foreign bank branch deposit requirements, along with guideline impact analysis statement.

    December 04, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4268