The Australian Prudential Regulation Authority (APRA) has released the key findings of a stress testing assessment it carried out on authorised deposit-taking institutions (ADIs).
Over 2018-19, APRA conducted a qualitative assessment of the internal stress testing capabilities of 28 ADIs, focusing on governance, scenario development and use of stress testing. APRA’s assessment identified a number of areas requiring ongoing improvement among ADIs, which it has outlined today in a letter to industry.
As an integral part of risk management, stress testing helps enhance the readiness of institutions to withstand adversity by improving their understanding of risk, enhancing capital management, informing recovery planning and reducing the likelihood of failure and resolution.
APRA intends to consult with industry in the second half of 2020 on a prudential practice guide on stress testing to promote industry better practice and consistency.
The letter to industry is available on the APRA website at Stress testing assessment: Findings and feedback.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $6.5 trillion in assets for Australian depositors, policyholders and superannuation fund members.