APRA published its submission to the Senate Economics Legislation Committee's Inquiry into the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017. The submission outlines key reforms in the proposed legislation. The proposed legislation is intended to ensure that the crisis management powers of APRA are fit-for-purpose, in the context of challenges that could emerge in the future.
The powers of APRA need to be able to be applied, in a proportionate manner, to the diverse population of financial institutions that APRA supervises. Although the proposed legislation draws on international standards for resolution regimes, these standards are adopted in a manner that is appropriate for the Australian financial system and consistent with the APRA mandate, including the core objective of protecting the interests of depositors and policyholders. APRA is focused on improving the crisis preparedness of its regulated industries in coming years, through developing its framework for recovery and resolution planning. The proposed legislation will help facilitate this and will provide APRA with a clear mandate to set formal prudential requirements for resolution planning and, where necessary, to require an institution to take preparatory measures to address barriers to its resolution, during normal times. The reforms are intended to:
- Enhance statutory and judicial management regimes of APRA to ensure their effective operation in a crisis
- Enhance the scope and efficacy of existing directions powers of APRA and improve its ability to implement a transfer under the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Transfer Act)
- Ensure the effective conversion and write-off of capital instruments, in accordance with the prudential standards
- Enhance stay provisions to ensure that the exercise of APRA’s powers against one entity in a group does not trigger adverse rights under contracts of other relevant entities in the same group
- Enhance ability of APRA to respond when an Australian branch of a foreign regulated entity may be in distress
- Enhance the efficiency and operation of the Financial Claims Scheme and ensure that it supports the crisis resolution framework
- Enhance and simplify powers of APRA in relation to the wind-up or external administration of regulated institutions, and other related matters
- Ensure that APRA has clear powers to make appropriate prudential standards on resolution planning and to require institutions to take measures to improve their preparedness for resolution, where appropriate
Related Link: APRA Submission (PDF)
Keywords: Asia Pacific, Australia, Banking, Recovery and Resolution Framework, Crisis Management Framework, APRA
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
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