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One of APRA’s core functions is to plan and implement prompt and effective responses to the failure of a regulated institution, or a crisis in the financial system.

APRA does not operate a zero-failure prudential regime — to do so would require APRA to place severe limitations on risk-taking by regulated institutions and within the financial system. Orderly exits are part of market dynamics in a competitive system.

In this context, if a regulated institution is failing or likely to fail, APRA’s aim will be to minimise losses to beneficiaries, and disruption to the broader financial system, by managing an orderly exit of the institution. By contrast, a disorderly failure would be one in which there is material disruption to the critical economic functions and services that the institution provides, resulting in significant impacts on beneficiaries, the financial system and the wider economy.

APRA aims for institutions to be appropriately prepared to recover from severe distress themselves, supported by credible plans for effective resolution at the point of failure where necessary. This involves APRA working with institutions to preposition for the effective implementation of resolution plans, which ensures the maintenance of critical functions in resolution and readiness for cooperation with domestic and international counterparts where needed. 

APRA continuously improves and regularly tests its operational capacity to resolve failures and near-failures in an orderly manner. Identifying any potential threats to the viability of institutions early enough is essential so that corrective action can be promptly initiated or orderly exit achieved. Strong operational processes are important for communications, enforcement activity, maintenance and implementation of resolution strategies and readiness to administer the Financial Claims Scheme, if declared, in the event of an institution failing.

Financial Claims Scheme logo

The Financial Claims Scheme

The Financial Claims Scheme (FCS) is an Australian Government scheme that protects depositors of locally incorporated banks, building societies and credit unions, as well as most policyholders of general insurers, in the unlikely event that one of these institutions fails. APRA is responsible for administering the FCS once it is activated by the Australian Government. For more information on the Scheme go to

For information on APRA's prudential framework for the Financial Claims Scheme for authorised deposit-taking institutions see: Prudential framework for the FCS for ADIs