Featured Product

    APRA Chair Speaks on Regaining the Lost Confidence in Financial Sector

    September 04, 2018

    The APRA Chair Wayne Byres spoke at the Annual Risk Management Association CRO Conference that was held in Sydney. He emphasized that that the theme of this event, which revolves around regaining the lost confidence in the financial sector, is both timely and important. He outlined the key regulatory and supervisory activities that APRA is pursuing to support and reinforce the efforts to restore the standing of the financial sector. He discussed the work of APRA in the areas of building an effective risk culture, implementing the Banking Executive Accountability Regime (BEAR), and setting out the remuneration requirements.

    According to Mr. Byres, understanding the attitudes to risk—that is, the risk culture—is fundamental to gaining confidence that an institution has robust risk management and is likely to remain in a sound financial position. Traditional prudential requirements for adequate financial resources may not be sufficient if faced with poor governance, weak culture, or ineffective risk management. He mentioned that the early goal in the risk culture work, coinciding with the commencement of CPS 220 on Risk Management in January 2015, was to raise awareness of the issue. However, getting a good handle on the risk culture of an organization—particularly a large and complex one—is not easy. Following the publication of an October 2016 information paper on risk culture, a cross-sectoral pilot program of risk culture reviews commenced. The first attempts proved informative, but also resource-intensive. Unfortunately, it was concluded that they were not going to be scalable. Now, the pilot risk culture assessment program is being re-scoped to make it more usable on a wider basis within the overall supervisory framework. The executives and their Boards are expected to establish and maintain the risk culture that they consider to be appropriate to their organizations, given their strategy and risk appetite. As set out in CPS 220, it is the job of the Board—inevitably supported by management—to form a view about whether the risk culture is appropriate and to initiate changes if required.

    The APRA Chair noted that BEAR formally came into effect on July 01, 2018 for the largest banks while other authorized deposit-taking institutions have until mid next year to get themselves ready. The major banks have identified and registered their accountable persons, developed reasonably detailed accountability statements, and from these put together accountability maps for their organizations. Returning to the theme of the event, Mr. Byres noted that BEAR will not necessarily aid the industry to regain the community’s trust, at least directly. Use of the enforcement provisions of BEAR will demonstrate to the community that there will be clear and material consequences for poor prudential outcomes. He further mentioned that one of the components within the BEAR that has attracted quite a bit of attention is the remuneration requirements, which come into effect during the course of 2019. The review of remuneration policies and practices across a sample of large APRA-regulated entities found that remuneration frameworks and practices across the sample did not consistently and effectively meet the objective of sufficiently encouraging behavior that supports risk management frameworks and long-term financial soundness. Mr. Byres also flagged the three key areas in which improvement is needed: outcomes, metrics, and oversight. 

    He mentioned, "....we intend to strengthen our prudential requirements in these areas......As senior leaders in the risk profession, I’d encourage you all to take a leadership role in this area to drive change. That will do far more to demonstrate a genuine commitment to regaining the trust than simply complying with new requirements imposed on you by regulators." Mr. Byres concluded that the efforts of the industry to strengthen risk culture, improve accountability, and develop more balanced performance measurement and remuneration practices are seen to be highly aligned with good prudential outcomes. However, increased regulation is an insufficient substitute for trust. It will ultimately be the industry’s collective behavior that determines the extent to which the trust and confidence of the community is regained.

     

    Related Link: Speech

    Keywords: Asia Pacific, Australia, Banking, BEAR, Risk Culture, Risk Management, CPS 220, Remuneration, APRA

    Related Articles
    News

    BoE Clarifies Approach to Treatment of Payment Holidays on Form PL

    BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.

    August 11, 2020 WebPage Regulatory News
    News

    BoE Provides Reporting Update on Form AS and Form FV

    BoE updated the known issues document for the statistical reporting Forms AS and FV.

    August 10, 2020 WebPage Regulatory News
    News

    FED Announces Capital Requirements for Large Banks

    FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.

    August 10, 2020 WebPage Regulatory News
    News

    SRB Publishes Guidance on Implementation of Bail-In Tool

    SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.

    August 10, 2020 WebPage Regulatory News
    News

    BIS Publishes Update on G20 TechSprint Initiative

    BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.

    August 10, 2020 WebPage Regulatory News
    News

    OSFI Provides Update on Implementation of IFRS 17 in Canada

    OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.

    August 07, 2020 WebPage Regulatory News
    News

    EBA Provides Clarity on Implementation of Guidance on COVID Reporting

    EBA updated the report on the implementation of selected COVID-19 policies.

    August 07, 2020 WebPage Regulatory News
    News

    FSI Note Discusses Challenges Associated with COVID Relief Measures

    The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.

    August 06, 2020 WebPage Regulatory News
    News

    BCBS Consults on Principles for Operational Risk and Resilience

    BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.

    August 06, 2020 WebPage Regulatory News
    News

    BoE Updates Template and Definitions for Form ER

    BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.

    August 05, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5650