The Australian National Audit Office (ANAO) today released its performance audit report on the prudential supervision of banks by the Australian Prudential Regulation Authority (APRA).
In its summary, the ANAO notes that APRA has negotiated the transition from the previous system of Commonwealth and State supervisors to become an integrated prudential regulator of all authorised deposit-taking institutions (ADIs). This has included establishing a new organisation structure with effect from August 1999, adopting from July 2000 a risk-based supervisory methodology for sophisticated financial institutions (including most banks) and the October 2000 introduction of harmonised Prudential Standards for all ADIs.
The report notes that APRAs supervision of banks conforms with most aspects of international best practice as set out in the Core Principles for Effective Banking Supervision recommended by the Basel Committee on Banking Supervision. APRA published its self-assessment against these Principles (which were finalised only toward the end of 1999) in April this year.
The ANAOs report also points out a few areas where APRAs practices could usefully be brought more closely into line with the Core Principles. These include the stringency of limits on banks large credit exposures, formal arrangements for information sharing with regulators in other countries, and a more structured scheduling of APRAs on-site visits to banks. APRA accepts the recommendations made in these areas. In some instances, work was already under way to move toward closer compliance with international best practice as part of APRAs normal review process; in other cases, APRA now intends to modify its current arrangements.
APRAs Chief Executive Officer, Graeme Thompson, said: APRA sees this report as a strong endorsement of its methods for supervising banks, and it welcomes the ANAOs recommendations. In any system of bank supervision, there will always be room for improvement as banking systems develop and international standards for supervisors are refined. APRAs supervision of banks is already up with worlds best practice and the recommendations in this report will help us to maintain that standing.
For further information contact:
Gloria Peterson
Public Affairs Manager
02 9210 3385 or 0419 250 286
