The Australian Prudential Regulation Authority (APRA) has finalised new requirements and guidance aimed at strengthening the preparedness of banks, insurers and superannuation funds to respond to a crisis.
The reforms are the culmination of several years of policy development to ensure the financial system is better prepared to manage periods of stress.
APRA commenced consultation in December 2021 on two new prudential standards designed to improve recovery and resolution planning among APRA-regulated entities.
- Prudential Standard CPS 190 Recovery and Exit Planning (CPS 190), which was finalised in December 2022, will ensure all APRA-regulated entities have recovery and exit plans for responding to severe financial stress. In a letter to industry today, APRA confirmed it has now finalised Prudential Practice Guide CPG 190 Recovery and Exit Planning (CPG 190), which accompanies CPS 190.
- APRA has also now finalised Prudential Standard CPS 900 Resolution Planning (CPS 900) and its accompanying Prudential Practice Guide CPG 900 Resolution Planning. Under CPS 900, large or complex APRA-regulated entities must support APRA in bespoke planning and pre-positioning to ensure that, in the event of failure, they can be resolved in an orderly manner.
APRA Chair John Lonsdale said the finalisation of these standards is an important milestone in APRA’s strategy to promote the stability of the Australian financial system.
“The Australian financial system is one of the strongest and most resilient in the world, but as we’ve just seen internationally, sometimes crises occur and we need to be prepared.
“In the unlikely event a bank, insurer or superannuation fund got into difficulty, it would need to ensure it could recover or exit from the market in an orderly manner. Where an entity is unable to do this, APRA would take steps to resolve the entity safely in a manner that protects its depositors, policyholders or members.
“CPS 190 and CPS 900, and their prudential practice guides, aim to promote the stability of the financial system in times of stress.
“We expect the requirements and guidance for recovery planning to underpin existing expectations for banks and insurers, which have experience in this area. For superannuation trustees, these requirements are new and will be more challenging. It is important that trustees continue to invest in their crisis preparedness ahead of their formal requirement to comply with CPS 190 at the start of 2025,” Mr Lonsdale said.
APRA continues to consult on related reforms for the superannuation industry related to planning by trustees in the event they need to transfer members out of – or into – their fund.
The letter and final versions of CPS 900, CPG 900 and CPG 190 are available at: Strengthening crisis preparedness.