APRA plays a unique role in Australia’s economy. As the steward of the prudential framework, it is responsible for promoting a safe and stable financial system. This is critical to the Australian community’s financial wellbeing and to the long-term growth and productivity of the economy.

A year ago, APRA introduced a new strategic objective: “Getting the balance right”. Since then, it has simplified requirements, reduced duplication and improved proportionality – without compromising on safety and stability. APRA Member Suzanne Smith reflects on the impact to date and what industry can expect next.

Why does prudential regulation matter for productivity?

APRA’s mandate is to ensure that the Australian financial system is safe and stable. With APRA-regulated entities managing more than $10 trillion in assets, the economic benefits of that stability are significant. It gives households and businesses the confidence to borrow, invest and plan for the future. It also helps prevent financial vulnerabilities from building up, which can cause severe economic harm when they unwind. International research suggests that the average net present value cost of a financial crisis, even if well managed, is around 43 per cent of GDP.

In delivering on our mandate, we do not pursue a “safety at all costs” agenda. The Australian Government's recent Statement of Expectations reinforced the importance of regulators supporting productivity and sustainable economic growth. For us, that means continually asking how we can achieve strong prudential outcomes without undue cost or complexity.

What does APRA mean by "Getting the balance right"?

“Getting the balance right” is not about reducing standards. It is about making sure we are delivering our prudential objectives – safety and stability – in the most efficient way possible. It means ensuring our requirements aren’t overly complex, are proportionate to risk and are regularly refined as the operating environment changes.

It is one of the priorities in APRA’s latest Corporate Plan:

• maintaining financial safety and stability so that the system can absorb shocks;
• “Getting the balance right” by maintaining high prudential standards while avoiding unnecessary cost and complexity; and
• improving organisational effectiveness so APRA’s people can respond quickly and decisively to emerging and escalating risks.

What has APRA delivered so far?

Over the past year, we have reduced costs and complexity for industry without compromising on safety and stability. Eight of the nine initiatives announced in last year’s Corporate Plan (see table below) are expected to be finalised by the end of 2026 and will deliver targeted reductions in burden for industry. Each action is incremental, but together they add up to meaningful change.

Banks will benefit from a new tier in APRA’s proportionality framework and a simpler licensing regime. Insurers have gained greater access to more cost-effective forms of reinsurance, while changes to annuity capital requirements are expected to lower costs and support growth in retirement income products. Across all industries, we have reduced duplication, improved data sharing with other government agencies and streamlined reporting.

We are also continuing to identify further opportunities to reduce unnecessary burden. This includes proposed changes to our bank capital framework that could free up new lending capacity to support business investment and productivity, as well as our work with New Zealand to harmonise bank capital rules. That work could reduce annual costs for banks operating in both jurisdictions by around $175 million.

Corporate Plan 2025-26 initiatives

* Expected to lower costs over time.

Further initiatives underway

Why has reducing data burden been such an important focus?

Industry has told us that the cumulative impact of data requests can be a major source of burden, particularly when different regulators seek similar information. Data is critical to effective supervision, but we need to collect it as efficiently as possible.

That is why we have been working closely with the Australian Securities and Investments Commission (ASIC) and other regulators to improve coordination, increase data sharing and reduce duplication. We are already seeing positive results. In the past 12 months, we have shared 30 per cent more data with external stakeholders, reducing what would otherwise be duplicative requests of industry.

Why shouldn’t every institution face the same requirements, regardless of size?

Proportionality is a long-standing feature of our prudential framework. We apply regulation only where necessary to achieve our objectives. The risks posed by large, complex institutions are different from those posed by smaller banks or insurers, so the approach to regulation should not be one-size-fits-all. Our policy framework applies simpler or fewer requirements to smaller entities, while placing greater scrutiny on the largest and most complex institutions.

We are continuing to build on existing proportionality in our framework. One recent example is the next evolution of APRA’s bank proportionality framework: a third tier that gives us greater flexibility to tailor requirements to an institution’s size and complexity. This helps ensure smaller banks aren't subject to unnecessary burden while maintaining appropriate safeguards across the financial system.

How is APRA changing the way it develops policy and supervises industry?

“Getting the balance right” is also about changing how we engage with industry. We are progressing a broad program of work to more firmly embed productivity, competition and efficiency considerations into APRA’s decision-making processes. We are also working closely with ASIC, the Reserve Bank of Australia (RBA), Treasury and other agencies through initiatives such as the Better Regulation Roadmap and the Regulatory Initiatives Grid.

These initiatives are strengthening our focus on cost-benefit analysis and helping us better understand the cumulative impact of regulation from an entity’s perspective. Burden does not always come from a single requirement. It can result from the combined effect of requests, consultations and obligations across regulators. Better coordination helps reduce duplication, improve transparency and give industry greater certainty. It also helps ensure we focus on practical changes that achieve the intended prudential outcomes with less cost and effort.

What can industry expect next from APRA’s “Getting the balance right” agenda?

Building on our initiatives from last year, our 2026-27 Corporate Plan includes additional actions to free up capital, streamline prudential requirements and remove duplicative reporting, without undermining safety standards. Our aim is for these simplification measures to offset the impact of new requirements we are introducing, resulting in a broadly net neutral impact on regulatory burden.

“Getting the balance right” is not about choosing between safety and efficiency. Good prudential regulation should deliver both: a resilient financial system that protects Australians’ financial interests and a targeted, proportionate and practical regulatory framework that avoids undue cost for industry.