APRA Welcomes Capability Review Report and Outlines Action Plan

The report made 24 forward-looking recommendations that seek to ensure that APRA is best placed to deal with its future environment and the challenges which lie ahead. Of these, 19 recommendations were made to APRA and five recommendations reside with the Government. The report recognizes APRA as a high-quality prudential supervisor that has been successful in delivering on its core mandate, which is to ensure the financial safety of regulated entities and a sound and resilient financial system. The recommendations were based on topics including leadership, organizational design, non-retail credit risk capacity, macro-prudential policy, crisis management and resolution, digital disruption, and financial resilience. APRA had already identified and begun work on many of the changes needed to strengthen its capability in the areas identified in the review. In August 2018, APRA released a four-year strategic plan that identified many of these themes. In addition, the new enforcement approach of APRA came into effect in April 2019 and implementation has begun on actions to respond to the Hayne Royal Commission. 

The report concluded that APRA must expand its capabilities in a number of areas while emphasizing that this should be done without jeopardizing its core capability in financial safety and financial stability. The report proposed a challenging and ambitious agenda that seeks to ensure that APRA can, in the future, continue to deliver effectively on its mandate. In some cases, the necessary steps are within the control of APRA to deliver. In others, APRA will require government support to effectively implement the recommendations through additional funding or legislative and/or policy changes, as acknowledged by the report. APRA noted the government indication that it will consider the need for any additional funding as part of the 2020-21 Budget process. The APRA response highlighted that, in line with the recommendations and with its own plans for change, APRA is committed to:

• Maintaining and build financial system resilience—APRA will retain its unwavering focus on financial safety and stability, while expanding its capability in other important areas.
• Strengthening leadership and culture—APRA is continuing to strengthen its own leadership capabilities and culture and will adjust its organizational structure to support flexible and effective modes of operating.
• Enhancing capability—APRA is strengthening both its resourcing and supervisory approach to make issues of governance, culture, remuneration, and accountability a much more prominent and central part of its supervisory framework.
• Strong outcomes focus in superannuation—Building on the recent legislative reforms, APRA will continue to embed its strengthened focus on member outcomes as the center piece of its supervisory approach in superannuation.
• Improving cyber and technology strategy—APRA has identified cyber and technology as priority areas for focus across all APRA-regulated industries and is developing a cyber and technology strategy that includes building strong allegiances with public and private sector experts.
• Strengthening crisis management and resolution—APRA is strengthening its resolution capability and crisis preparedness under the strategic initiatives of the 2018-2022 Corporate Plan. APRA will provide advice to the government by the end of 2019 on the status of this work and the additional resources needed to enable it to be advanced more quickly.

Related Link: Media Release and APRA Response

Keywords: Asia Pacific, Australia, Banking, Insurance, Superannuation, Pensions, Governance, Cyber Risk, Resolution Framework, Capability Review, APRA