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

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596