The first Annual Report of the Australian Prudential Regulation Authority (APRA), released today, describes an intense year spent forming the new organisation while assuming and carrying out the regulatory responsibilities of its predecessor organisations.
APRA was established on 1 July 1998 as part of the Federal Governments response to the Wallis Reports recommendations to establish a stronger financial regulatory regime to meet the needs of business and consumers and to respond more quickly to the challenges of change in financial markets.
The new organisation took on responsibility for the prudential supervision of banks from the Reserve Bank of Australia and for life and general insurance and superannuation from the Insurance and Superannuation Commission. In July 1999, it also assumed the regulatory responsibilities for State-regulated building societies, credit unions and friendly societies.
A new team-based organisation structure developed by APRA during the year will provide a more integrated approach to prudential regulation than in the past. Each team is responsible for supervising either a small number of diversified financial institutions or a larger number of specialised ones. The teams are supported by risk management specialists and policy development and statistics staff.
The innovative structure will allow APRA to adopt a more consistent and integrated method of supervision across the financial system. Another aim is to provide a single point of contact for each conglomerate group in order to supervise as efficiently and cost-effectively as possible.
While APRAs focus in its first year has been very much on internal issues, it has also made considerable progress in policy development, in consultation with industry. Proposals on conglomerates and a review of general insurance have been issued for industry comment and should lead to significant advances in regulatory policy in Australia. Goals for the coming year include the creation of a single, consistent set of prudential rules for all deposit-takers. Banks, credit unions and building societies are now all licensed and supervised under the same statutory regime.
APRAs Annual Report provides an overview of the industries it regulates. It finds the financial industry generally in a sound condition, with healthy profits in the banks and life insurance sectors. Some sections of the general insurance industry have been under pressure as a spate of natural disasters has put stress on the reinsurance business. APRA has been monitoring the situation closely.
APRA regulatory activities in 1998/99 also included:
- Banking
42 consultations with banks senior management to review performance and strategy; regular meetings with external auditors to discuss the integrity of data provided to APRA; 20 on-site reviews of credit risk management practices; 21 visits by specialist market risk staff; and numerous meetings on prudential issues that arose on a day-to-day basis.
- Life insurance
43 annual reviews and two review updates of life insurance companies; the deregistration of five life companies after the transfer of their existing business to other companies; and four additional life business transfers were completed.
- General insurance
60 meetings with company representatives and 142 company visits; close supervision of reinsurance exposures in a number of companies; and registration of three new captive mortgage insurers.
- Superannuation
reviews of 1,091 corporate funds and 56 approved trustees.
- Credit unions, building societies, friendly societies
these entities did not come under APRA supervision until 1 July 1999, but a great deal of time was spent in preparation for their transfer.
During the year, APRA also forged strong links with fellow regulators both internationally and at a domestic level. It hosted the first international meeting of integrated supervisors in May 1999.
In conjunction with the Reserve Bank of Australia and the Australian Securities and Investments Commission, APRA closely monitored the Year 2000 preparations of regulated institutions through regular reports and meetings. APRA is confident that institutions are taking appropriate measures to address Year 2000 issues, including extensive contingency plans in case of need.
A full copy of APRAs 1998/99 Annual Report can be found on the APRA web site at this address (www.apra.gov.au).
For further information contact:
Gloria Peterson
02 9210 3385
