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Opening statements

Opening statement for House of Representatives Standing Committee on Economics - March 2021

Monday 29 March 2021

Wayne Byres, Chair - House of Representatives Standing Committee on Economics, Canberra

Thank you for the opportunity to appear today. 

APRA’s 2019/20 Annual Report, which is the subject of this hearing, was published in October 2020. Much of the Report describes how APRA responded to an incredibly challenging year for the financial sector and the Australian community.

An extraordinary series of events in the first half of 2020, including a devastating bushfire season, severe storms and flooding across vast areas of the east coast followed by a once-a-century pandemic, served to severely test the resilience of the Australian financial system.

The Report outlined our shift from a well-planned regulatory and supervisory agenda, built on our 2019-2023 Corporate Plan, to redeploy resources to respond to the severe and sudden disruption and heightened financial risk caused by the pandemic, including providing important regulatory relief to institutions. 

The Report also noted that APRA-regulated institutions had stood up to the challenges of the past year, both financially and operationally, and continued to fulfil their critical roles in society and the economy. That remains the case today.

This positive outcome reflects a long period of investment in financial and operational resilience, founded on a strong prudential framework. This investment meant that each industry we oversee was able to withstand the events of the past year, while also playing a part in helping cushion the blow from weaker economic activity: for example, through loan deferrals by banks, premium adjustments by insurers, and early release payments by superannuation funds.

In addition to the Annual Report, early this year we published our 2020 Year in Review, where we noted APRA’s focus on ensuring that the regulatory relief and reduced burden we provided to support institutions through the pandemic did not materially weaken the fundamental strength of the financial system over the long term.

A stable and resilient financial system is a critical foundation for Australia’s economic recovery. In that regard, alongside the Year in Review we published our policy and supervisory priorities for the period ahead. As with our latest Corporate Plan, our priorities have been shaped to respond to the post-crisis environment.   

APRA’s supervision priorities include:

  • maintaining financial system resilience through increased action on crisis readiness, including recovery and resolution planning and stress testing;
     
  • addressing areas of superannuation underperformance, taking enforcement action where appropriate and providing greater transparency through the expansion of the heatmaps to include Choice products;
     
  • increased scrutiny of entities’ cyber security capabilities; and
     
  • embedding the soon-to-be-finalised new remuneration standard, and undertaking a range of governance and risk culture supervisory reviews and deep dives.

On the policy front, our key priorities include:

  • 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; 
     
  • continuing work on strengthening the capital framework for private health insurers;
     
  • driving continued improvement in member outcomes through a range of enhancements identified by APRA’s post-implementation review of the original superannuation prudential framework introduced in 2013, as well as substantially improved data reporting requirements announced last week, which will give APRA much more granular data relating to fund performance, fees and costs; and
     
  • updating our suite of prudential standards dealing with operational resilience across the financial sector.

Finally, I would note that we are on track to complete our work on the 10 Royal Commission recommendations and 12 enforcement referrals directed to us, by the end of this year.

With these opening comments, my colleagues and I are happy to answer your questions.

Media enquiries

Contact APRA Media Unit, on +61 2 9210 3636

All other enquiries

For more information contact APRA on 1300 558 849.

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 $7.7 trillion in assets for Australian depositors, policyholders and superannuation fund members.