APRA uses a broad range of tools to supervise financial institutions and promote the stability of the broader financial system.
APRA licenses banking, insurance and superannuation businesses to operate and supervises them to ensure that under all reasonable circumstances, the financial promises made to their beneficiaries (i.e. depositors, policyholders and superannuation fund members) are kept. The rules and requirements for starting a prudentially regulated entity in Australia differ depending on the type of business that is being established.
Further information on APRA's licensing process can be accessed on the Licensing page.
APRA establishes prudential standards that regulated institutions must comply with. These standards set out a range of requirements in relation to:
- financial soundness;
- risk management; and
In some areas, there are also additional requirements set out in legislation that APRA administers.
Where possible, APRA seeks to establish requirements that are principles-based, so that institutions are able to meet these requirements in a manner that best suits the size, scope and nature of their business. APRA also publishes additional guidance to assist institutions to understand and meet APRA’s expectations.
Further information on APRA’s role in setting prudential standards can be accessed on the Policy page.
After an institution is licensed by APRA, it is subject to ongoing supervision to ensure it is meeting APRA’s prudential requirements. APRA supervisors do this by examining data and reports about institutions and the broader financial sector (off-site analysis), and by visiting supervised institutions to speak to staff and, where appropriate, examine records and files (on-site analysis).
APRA’s supervision aims to identify potential financial or operational weaknesses in an institution as early as possible, and ensure they are rectified before they can threaten its safety and soundness.
Further information on APRA's supervision can be accessed on the Industry supervision page.
If APRA has concerns about a supervised institution’s prudential strength or risk management, it will seek to work cooperatively with the management and directors to have those issues promptly addressed. If the institution is uncooperative, or APRA otherwise considers it necessary, APRA can take a range of enforcement actions against an institution, or individuals associated with that institution, to protect the interests of depositors, policyholders and members of superannuation funds.
Further information on APRA's enforcement powers can be accessed on the Enforcement page.