Contrary to reports in the media today, particularly on radio, the Australian Prudential Regulation Authority (APRA) has not scaled back regulation of companies in the last two years. In fact, our regulation has been strengthened by major advances in both policy development and supervisory practice.

All of this work has been directed toward enhancing Australias financial system and providing the best protection possible for Australian savers and policyholders.

In supervisory practice, we have taken significant strides to improve on what we inherited a couple of years ago.

For instance, APRA now conducts on-site reviews in all industry sectors. This was not done regularly  for insurance companies before APRA was established and was a major flaw in previous practice.

Another example is a thorough review of statistics collected from regulated entities that revealed serious gaps  these are being addressed in a major project that has already introduced some considerable improvements.

Assessments of APRA against international standards for bank supervision show us in substantial compliance with recommended best practice; and we are continually upgrading practices in this area.

In policies and standards:

• APRA introduced a comprehensive framework for supervising conglomerate groups that include banks  the key innovation here was a set of criteria for accepting non-financial or commercial activities within such groups.

• We have issued a single set of flexible prudential standards for all deposit-takers  banks, credit unions and building societies.

• We established a group to investigate the various operational risks incurred by financial institutions, one of the first such dedicated teams in the world.

• We have commenced a review of supervisory arrangements for superannuation and of the Life Insurance Act.

• And, in a major project, in late 1998, we embarked on, and have just about completed, a thorough overhaul of the supervision arrangements we inherited for general insurance companies. This had been a long-neglected area, well overdue for reform.

It is not true, as reported in this mornings Australian Financial Review, that APRA scaled back actuarial scrutiny of insurance companies after 1998 in order to save money. The facts are:

• The Insurance and Superannuation Commission (the insurance regulator up to 1998) ceased the practice of sending insurance company reports routinely to the Australian Government Actuary before APRA was established.
  
  
• This was done by the ISC because the value of using the practice for every company, as a matter of course, was questionable, not to save money.
  
  
• APRAs new prudential standards  due to be introduced next year  will require most companies to have an appointed valuation actuary with statutory reporting obligations to APRA.

 

For further information contact:

Gloria Peterson Public Affairs Manager 02 9210 3385 or 0419 250 286