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APRA releases its policy and supervision priorities for 2021

The Australian Prudential Regulation Authority (APRA) has released its policy and supervision priorities for the coming year. Consistent with APRA’s strategic objectives detailed in its Corporate Plan, a key focus is to further enhance the resilience and crisis readiness of Australia’s financial system.

APRA suspended much of its planned policy and supervision agenda in March 2020 in order to prioritise activities to respond to the impacts of COVID-19. The agenda recommenced in late 2020 at the point when APRA and its regulated entities had sufficient capacity.

Delivering APRA’s proposed policy and supervision priorities for the coming 12 to 18 months requires working closely with peer regulators to deliver efficient, proportionate regulation that facilitates a resilient, competitive and innovative financial sector, able to support the recovery from the impacts of COVID-19.

APRA’s key policy priorities include:

  • finalising and implementing a revised prudential standard on remuneration, a key Royal Commission recommendation that remains outstanding;

  • strengthening crisis preparedness, including the development of a new prudential standard on resolution and recovery planning, taking into account the lessons and learnings of the past 12 months;

  • updating prudential standards on operational risk, governance and risk management, and consulting with industry on guidance for climate change financial risk;

  • completing the ongoing review of the capital framework for authorised deposit-taking institutions to fully implement ‘unquestionably strong’ capital ratios and the Basel III reforms;

  • supporting implementation of the government’s Your Future, Your Super reforms to improve member outcomes as well as progressing a range of enhancements recommended by APRA’s post-implementation review of the original superannuation prudential framework introduced in 2013; and

  • continuing work on strengthening the capital framework for private health insurers.

In relation to its supervision activities, APRA’s priorities include:

  • maintaining financial system resilience through increased action on crisis readiness, including recovery and resolution planning and stress testing;

  • increased scrutiny of entities’ cyber security capabilities;

  • embedding the new remuneration standard, conducting a risk culture survey, undertaking a range of GCRA-related supervisory reviews and deep dives, and working to close risk governance issues currently requiring capital overlays; and

  • addressing areas of MySuper underperformance, taking enforcement action where appropriate and providing greater transparency through the expansion of the heatmaps to include Choice products.

APRA Chair Wayne Byres said while the industry demonstrated its resilience in 2020 on the back of substantial public sector support, it was important to continue strengthening the financial system to ensure it was prepared for the potential crises of the future.

“Last year, the industry demonstrated an ability to adapt and continue serving the needs of customers, despite a number of severe operational challenges and disruptions.

“The robust response to date is not a cause for complacency, but underlines the value of an ongoing regulatory program that seeks to identify risks and put in place appropriate mitigation strategies to protect the interests of depositors, policy holders and fund members.

“As a forward-looking safety regulator, APRA’s priority is to maintain a financial system that is resilient and able to fulfil its important role in the Australian economy, whatever the circumstances.

“Given the continued uncertainly generated by COVID-19, APRA’s proposed policy and supervision agenda for the coming period will remain responsive to the external environment to ensure it continues to prioritise the areas of greatest need,” Mr Byres said. 

The Policy Priorities and Supervision Priorities documents are available on the APRA website at: APRA's 2021 Supervision and Policy Priorities.

Your Future, Your Super

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The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding around $9 trillion in assets for Australian depositors, policyholders and superannuation fund members.