Featured Product

    APRA Chair Speaks About Uncertain Impact of Financial Innovations

    September 24, 2018

    At the 2018 Curious Thinkers Conference in Sydney, the APRA Chairman Wayne Byres examined the potential impact of financial technologies on the financial sector. In this context, he believes that the task of APRA is to ensure that regulated entities are adequately managing change and not exposing customers to undue risks. APRA should also ensure that regulation and supervision are fit for the future and can adapt as the financial system and its participants evolve.

    APRA Chair revealed that an APRA review of the systems hygiene in the banking sector, suggested that the issues identified reflect persistent underinvestment over a number of years. The reviews emphasize that, to facilitate new technology, investment budgets need to be increased, not just reprioritized. APRA released its first information security prudential standard for consultation in March and it wants cyber-soundness to be thought about in the same way as institutions think about financial soundness. Additionally, in the area of cloud computing, APRA released an updated version of its 2015 paper, which acknowledges advancements in the safety and security in using the cloud, along with the increased appetite for doing so, especially among new and aspiring entities that want to take a cloud-first approach to data storage and management. In addition to reinforcing steps to minimize the risks of cloud usage, the information paper also summarizes observed weaknesses that industry must continue to focus on. While cloud usage, as with all other shared service arrangements, involves a degree of shared responsibility, boards and senior management of regulated entities remain ultimately accountable for the security of their data. That accountability cannot be outsourced.

    A major challenge that technology poses for regulators is the growing trend toward outsourcing and partnering, according to Mr. Byres. Outsourcing and partnering is increasingly occurring for business-critical functions, not just at the periphery of activities. Many of these new partners and providers of critical functions sit outside regulators’ reach. The prudential supervisors’ ability to “kick the tyres” will be much harder in future, without new tools and methods. This gives rise to the systemic risk of an ostensibly large and diverse number of entities all dependent on just a few unregulated providers for critical services, creating a substantial concentration risk and increasing the threat of contagion in the event of a service failure. Applicants for new banking licenses may not fit the traditional mold and that is another risk posed by technology. Consequently, APRA has established a new licensing regime to provide for easier entry—but not lower standards—to the banking system for applicants with unconventional or non-traditional business models. The goal of the new Restricted Authorized Deposit-taking Institution regime is to allow applicants to commence limited banking business while still developing their capabilities and resources. It also allows APRA to learn about, and gain comfort with, new ways of doing things. 

    APRA is increasing effort to ensure that it has the expertise, knowledge, and technology in place to monitor and interpret the changing nature of the financial sector. APRA has established an internal Fintech Council to examine developments and trends in the fintech sector. Guided by the Council, APRA has stepped up the engagement with a range of players from outside the regulated sphere, such as Fintech Australia, the RegTech Association, and InsureTech Australia. The purpose of this engagement is to create a dialog with players in these emerging sectors to ensure APRA is up-to-speed with developments and to keep ahead of emerging issues that may cause regulatory challenges. He also welcomed the valuable insights gained from participating in ASIC’s Digital Finance Advisory Committee. Finally, he said that one of APRA’s key strategic priorities over the coming years is to broaden its risk-based supervision.


    Related Link: Speech

    Keywords: Asia Pacific, Australia, Banking, Fintech, Regtech, Outsourcing, Cloud Computing, APRA

    Related Articles
    News

    UK Authorities Consult on Implementation of Basel 3.1 Standards

    The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.

    November 30, 2022 WebPage Regulatory News
    News

    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
    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
    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
    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
    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
    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
    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
    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
    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
    RESULTS 1 - 10 OF 8597