APRA Corporate Plan 2017-2021
The Corporate Plan (PDF version) sets out information on APRA’s key strategies and activities over a rolling four year period. Publication of a corporate plan is a core element of the Public Governance, Accountability and Performance Act 2013 (PGPA Act).
The Australian Prudential Regulation Authority (APRA) is an independent statutory authority established for the purposes of prudential supervision of financial institutions and for promoting financial system stability in Australia.
In performing this role, APRA is responsible for, in particular, protecting the interests of depositors, insurance policyholders and superannuation fund members – collectively referred to as APRA’s beneficiaries. Protecting the financial interests of these beneficiaries lies at the centre of APRA’s mission.
APRA’s core operational activities - supervision, policy and resolution - are the foundations for achieving its mission and are stable over time. These core functions are enabled by APRA’s core capabilities: its people and culture, its risk intelligence and frameworks and its organisational effectiveness and infrastructure.
APRA’s approach is to supervise institutions with a combination of regulation and active supervision, with a focus on principles rather than prescription, an emphasis on outcomes rather than process, and an intensity which reflects both risk and systemic importance. APRA seeks to do this by having highly skilled and engaged people supported by strong leaders within a values-aligned culture and a robust and efficient organisation with secure and reliable infrastructure.
APRA’s planning horizon is four years. Each year, APRA reviews its operating environment to identify risks and opportunities that may be relevant to the successful delivery of its mission. Over the next four years, APRA will strengthen its core functions and capabilities through delivery of its strategic initiatives:
- Enhancing leadership, culture and opportunities for APRA’s people
- Honing governance and workplace effectiveness
- Sharpening risk-based supervision
- Building recovery and resolution capability
APRA’s long term strategic direction is shaped by its purpose, vision, mission and role, and the values it seeks to demonstrate. Some of the elements of this broad governing framework are set in legislation but others are dynamic and need to be kept under review as circumstances change.
Our vision is to be a world-class prudential regulator, with excellence of supervision as our foundation.
Our mission is to establish and enforce prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by institutions we supervise are met within a stable, efficient and competitive financial system.
APRA also acts as a national statistical agency for the Australian financial sector, plays a role in preserving the integrity of Australia’s retirement incomes policy and administers the Financial Claims Schemes.
APRA is an independent statutory authority established for the purpose of prudential supervision of financial institutions and for promoting financial system stability in Australia.
APRA is the prudential supervisor and resolution authority for the majority of the Australian financial services sector. It oversees Australia’s banks, credit unions, building societies, general, life and private health insurers, reinsurers, friendly societies and most of the superannuation industry. APRA is funded largely by the industries that it supervises. APRA currently supervises institutions holding over $5.9 trillion in assets for Australian depositors, policy-holders and superannuation fund members.
APRA regulates and supervises institutions in the financial sector in accordance with various laws of the Commonwealth, including industryspecific Acts. These Acts in turn mandate APRA to protect the interests of APRA’s beneficiaries.
In performing and exercising its functions and powers, APRA is to balance the objectives of financial safety and efficiency, competition, contestability and competitive neutrality and, in balancing these objectives, is to promote financial system stability in Australia.
APRA, and its staff, seek at all times to demonstrate integrity, respect, collaboration, excellence and accountability.
Our core functions and capabilities
|Our core functions||Our core capabilities|
|APRA meets its purpose through its core functions, which reflect its role as a prudential supervisor and resolution authority. These are stable over time.||APRA’s core capabilities are its people, its specialist skills and frameworks, and the way it manages the organisation and supporting infrastructure. These capabilities support: achievement of APRA’s purpose; sound decision making that complies with policies and legislation; maintaining high standards; and making cost-effective use of the resources available to it.|
|Supervision||People and Culture|
|Protect beneficiary interests and promote financial stability by identifying and responding to significant risks in a timely and effective manner.||Have highly skilled and engaged people supported by strong leaders within a values-aligned culture.|
|Policy||Risk intelligence and frameworks|
|Protect beneficiary interests by setting minimum standards for institutions and empowering supervisors to achieve supervisory outcomes.||Have strong analytical capabilities, using available data and specialist expertise within structured frameworks, which support well-founded, risk based decisions.|
|Resolution||Organisational effectiveness and infrastructure|
|Protect beneficiary interests by planning for and implementing prompt and effective responses to a failure or crisis in the financial system.||Have robust and efficient business support, transparent and accountable practices, and secure and reliable premises and systems.|
APRA continually considers opportunities to strengthen its core operations. Our strategic initiatives for 2017-21 set out APRA’s highest priority areas for change over the next one-four years.
|Enhancing leadership, culture and opportunities for its people||Honing governance and workplace effectiveness|
|Enhancements that support leaders in sustaining a progressive, high performing and inclusive culture.
||Modernising data and analytical capabilities and fostering aligned, simplified and agile governance structures, workplaces and systems.
|Sharpening risk-based supervision||Building recovery and resolution capability|
|Improving support for judgments, priority setting and supervisory intensity through risk assessment tools and more structured risk intelligence, benchmarks and oversight.
||Build a clear and effective failure framework underpinned by internal and external readiness.
APRA’s operating environment
Australia continues to benefit from a financial system that is fundamentally sound, reflecting a long period of relatively consistent economic growth. However, risks to institutions or financial stability can emerge quickly and APRA needs to be proactive and positioned to respond.
APRA’s supervision is conducted within an environment of heightened public scrutiny, of APRA-regulated industries, as well as APRA itself, over the last year or so and this is expected to continue in the foreseeable future.
Global economic conditions have generally improved over the last year, and the outlook is for this improvement to continue. Central banks have stabilised, and in some cases increased, interest rates, however interest rates remain low by historic standards and monetary policy remains expansionary. Policy and political uncertainty remains elevated, however, reflecting amongst other things a new administration in the US, the ongoing Brexit negotiations, and a number of elections in Europe throughout the year. There are also continuing challenges in managing the transition in China’s economy, particularly given the large stock of debt that has built up over recent years.
International standard-setters continue to have active agendas. The Basel Committee on Banking Supervision reforms for bank capital are yet to be completed. As a result, APRA has announced it will no longer wait for international policy certainty prior to implementing the Financial System Inquiry (FSI) recommendation that bank capital should be ‘unquestionably strong’, and will consult in coming months on the most appropriate means of achieving the further strengthening in capital ratios necessary to fulfil the FSI’s recommendation. The International Association of Insurance Supervisors (IAIS) continues to pursue an international capital standard for insurers and APRA continues to engage in this international reform.
The increasing focus on the benefits of fintech, and the risks of cyber crime, are ensuring financial institutions and their regulators are required to devote greater time and attention on technology-related matters. APRA is examining the challenges and opportunities of fintech, and is reviewing its licensing processes to examine how the benefits can be harnessed without unduly adding risks to the financial system. APRA will also be continuing to review how cyber security risks are being addressed by APRA-regulated entities, in addition to enhancing its own processes for effectively mitigating these risks.
APRA has publicly noted the risks posed by climate change to APRA-regulated industries, and encourages institutions to assess the impact of climate change to their business as part of prudent risk management.
In Australia, the economic environment of low interest rates, low wages growth and high household debt persists. Public scrutiny of conduct across the financial sector is expected to remain heightened at a time when APRA has also increased its attention on risk culture and governance practices in APRA-regulated industries. Key areas of focus for APRA are:
- profitability challenges that continue in the life insurance industry;
- ongoing need for improvements to prudent housing lending standards in Authorised Deposit-taking Institutions (ADIs);
- building crisis readiness across multiple industries via resolution and recovery plans; and
- further enhancing governance and risk management practices in the superannuation industry and promoting a strong focus by trustees on delivering quality, value outcomes for members.
APRA has made solid progress towards integrating Private Health Insurers (PHIs) into APRA’s prudential framework with an initial focus on risk management and governance. APRA has had a significant uplift in its infrastructure over the last year and work practices are changing as it realises the benefits of more contemporary work environments and modern technology. An emerging opportunity for APRA is to transform the use of data analytics to support its supervisory risk assessments and increase the transparency of its data in line with whole-of-government initiatives towards an open data environment.
APRA’s ability to attract and maintain staff is critical to its success as a prudential supervisor. APRA will continue to ensure that it has highly skilled and engaged people supported by strong leaders in a progressive, high performing and inclusive culture.
In the development of this Plan a review of the current internal and external factors impacting APRA’s operating environment has been undertaken, including the most significant risk areas from APRA’s Enterprise Risk Management Framework.
|1||APRA failed to apply appropriate judgment in identification or response to material risks in an individual institution or the financial system.|
|2||APRA was insufficiently ready to respond to a failure in an institution or the financial system, including effective administration of the FCS.|
|3||APRA’s prudential policy framework was insufficiently robust to support achievement of its mission.|
|4||APRA was unable to attract and retain the people needed to support its core operations.|
|5||APRA’s business operations were insufficiently robust to deliver efficiency and effectiveness benefits.|
|6||APRA’s infrastructure or confidential information was compromised.|
|7||APRA experienced a reduction in government support that materially impeded its independence and ability to carry out its mission.|
|8||APRA experienced reputational damage due to misalignment of stakeholder expectations in relation to APRA’s role or mandate.|
APRA does not pursue a ‘zero failure’ regime. Rather, APRA seeks to maintain a low incidence of failure of APRA-regulated institutions while not impeding continued improvement in efficiency or hindering competition.
APRA’s aim is to identify likely failure of an APRA-regulated institution early enough so that corrective action can be promptly initiated or orderly exit achieved.
In monitoring and assessing its performance, APRA draws on a range of indicators and qualitative information relevant to each of APRA’s core functions and capabilities. At the end of each financial y ear, an Annual Performance Statement is included in APRA’s Annual Report.
APRA assesses its performance in meeting its primary purpose as an effective prudential supervisor by the extent to which the Australian community is exposed to loss through the failure of a regulated institution. The two key ratios APRA uses for this purpose are the performing entity ratio (PER) and the money protection ratio (MPR).
- The PER is an indicator of the incidence of failure amongst regulated institutions. It is determined as the number of regulated institutions that met their commitments to beneficiaries in a given year divided by the total number of regulated institutions. The higher the percentage, the lower the incidence of failure.
- The MPR is an indicator of the incidence of loss in the financial sector. It is determined as the dollar value of liabilities to beneficiaries in Australia in a given year, less any losses due to prudential failures, divided by the total dollar value of liabilities to beneficiaries in Australia in APRAregulated institutions. Again, the higher the percentage, the lower the incidence of loss.
Since APRA’s inception in 1998 the PER has averaged 99.92 per cent and the MPR has averaged 99.97 per cent.1
1. The annual averages of PER and MPR are calculated with end of financial year data. The latest annual data used to calculate long term averages is as at 30 June 2016.
How APRA achieves its purpose
APRA’s core functions
APRA achieves its purpose through its core functions. These outline the key strategies that APRA will implement to achieve its mission.
|Protect beneficiary interests and promote financial stability by identifying and responding to significant risks in a timely and effective manner.|
APRA does this by
Identifying significant risks to institutions, industries or financial stability
Effective supervision involves identifying and responding to issues and risks at an idiosyncratic, industry and financial system level through a range of activities including financial analysis, on- and off-site entity reviews, thematic reviews and stress testing. APRA has a broad range of specialists who participate in these supervision activities. The early identification and escalation of significant risks support APRA’s ability to take effective corrective action where warranted.
Focusing on achieving clear prudential outcomes
Effective supervision requires a clear view on the outcomes sought from supervisory activities. Identifying desired outcomes and developing appropriate supervisory strategies to achieve those outcomes is important in the development of supervisory action plans.
Tailoring supervision efforts and resources according to risk
As a risk-based supervisor, APRA operates within a clear risk appetite and prioritises attention on significant risks to which an institution, or the financial system, is exposed. This involves undertaking proactive, forwardlooking activities to support risk assessments, identifying key risks and responding promptly to issues of concern. Supervisory resources are applied to broadly align to the risk profile and systemic importance of institutions and activities are undertaken in a manner to ensure quality and rigour are maintained, within and across APRA-regulated industries.
Having credible plans in place for institutions to recover from adversity
An important aspect of APRA’s work involves assessing how well institutions can manage adversity and stress. Supervisors assess the credibility of contingency plans and how well an institution has integrated these in its risk management framework. Where we have identified the need, APRA assesses whether institutions have credible and proportionate recovery plans in place.
|Protect beneficiary interests by setting minimum standards for institutions and empowering supervisors to achieve supervisory outcomes.|
APRA does this by
Establishing a robust prudential framework that reflects all elements of APRA’s mandate
The framework aims to protect beneficiary interests by requiring prudent practice from institutions and enabling prompt, effective and proportionate supervisory response to significant risks. We aim to set requirements that are clear and well understood by institutions and supervisors. Where appropriate, requirements are principles-based and allow a range of prudent practices to achieve an outcome.
APRA focuses review and development of the prudential framework on priority areas for financial system safety and stability and, where relevant, taking into account key international standards, as appropriate for Australian conditions.
In setting and maintaining its prudential framework APRA seeks to be transparent in how it balances financial safety with efficiency, competition, contestability and competitive neutrality and, in doing so, promote financial stability.
Maintaining a robust and flexible failure and crisis resolution framework
The legislative and prudential framework for failure and crisis management is critical in APRA protecting beneficiary interests and financial stability in the event of market disruption or the failure of an institution. It seeks a framework that is robust and provides flexibility as the basis for achieving an orderly failure of one or more institutions where needed.
Ensuring policy development processes are effective
APRA seeks to deliver enhancements to the prudential framework through a thorough and consultative policy process, consistent with the Office of Best Practice Regulation principles. It seeks to clearly identify and engage internally and externally on expected outcomes, constraints and alternative approaches to meet those outcomes. APRA maintains strong engagement with Treasury on all legislative and policy matters, and with other domestic regulatory authorities on policy developments relevant to them. APRA also seeks appropriate engagement in international standard setting relevant to its mandate.
|Protect beneficiary interests by planning for and implementing prompt and effective responses to a failure or crisis in the financial system.|
APRA does this by
Ensuring credible resolution plans are in place for institutions in case of failure
APRA aims for institutions to be appropriately prepared to recover from severe adversity themselves, supported by credible plans for effective resolution at the point of failure where necessary. This involves working with institutions to preposition for the effective implementation of resolution plans which reflects critical functions that need to be maintained in resolution and working with domestic and international counterparts to ensure readiness for cooperation where needed.
Maintaining effective operational capacity to resolve failures and near-failures
We continuously improve and regularly test our operational capacity to resolve failures and near-failures in an orderly manner. Identifying any potential threats to the viability of institutions early enough so that corrective action can be promptly initiated or orderly exit achieved is key. Strong operational processes for communications, enforcement activity, maintaining or applying resolution strategies and readiness to administer the FCS, if declared, in the event of an institution failing are important.
Supporting operation of the FCS for ADIs and General Insurers (GIs)
We aim for the FCS to provide security and assurance for depositors and policyholders by maintaining public awareness of the scheme and, working together with other agencies, being ready to execute the scheme when declared. We expect ADIs and GIs to have a strong level of readiness to deliver their obligations under the scheme.
Engaging effectively with other agencies to minimise disruption to the financial system in the event of failure or crisis
Considerable engagement, both domestically and, for some institutions, internationally, is necessary to effectively respond to failed and near-failing institutions. APRA has strong and ongoing engagement with the Council of Financial Regulators (CFR) agencies and other key agencies such as the Trans-Tasman Banking Council (TTBC). We share information and co-operate on the development of strategies and plans. We undertake regular crisis simulations to ensure co-ordination with other agencies is effective and to assess operational readiness.
APRA’s core capabilities
APRA’s core capabilities are its people, its specialist skills and frameworks, and the way it manages the organisation and supporting infrastructure.
People and culture
|Have highly skilled and engaged people supported by strong leaders within a values-aligned culture.|
APRA does this by
Fostering a culture that promotes achievement of APRA’s mission
APRA fosters a culture that promotes staff engagement through a clear mission and established values. Staff at all levels across APRA demonstrate APRA’s values in day-to-day behaviours and work practices and internal frameworks support APRA’s culture.
Inspiring staff to achieve outcomes
APRA’s leaders and managers strive to inspire staff to achieve business outcomes through clear and consistent communications on our organisational priorities, establishing inclusive workplaces and effectively engaging staff. APRA continues to build a performance-based workplace through ongoing demonstration and promotion of desired leadership and managerial behaviours.
Providing a compelling employee value proposition
APRA promotes a progressive, high-performing and inclusive culture through a broad range of opportunities for reward, recognition and professional and personal development. Other benefits further support staff, such as health and wellness initiatives and the promotion of flexible work arrangements.
Ensuring strategic workforce planning is effective
Contemporary approaches to strategic workforce planning, to organise work and people and embed talent management practices, aim to assist us in ensuring we have the right people with the rights skills to achieve our goals. APRA’s specialist skills and technical capacity is built and maintained through strong recruitment and learning and development opportunities that attract and retain people with a diversity of experience, qualifications, aptitude and alignment to APRA’s culture.
Risk intelligence and frameworks
|Have strong analytical capabilities, using available data and specialist expertise within structured frameworks, which support well-founded, risk-based decisions.|
APRA does this by
Partnering between core functions and specialists
APRA’s broad range of specialists are integral to our core functions. Leveraging our collective expertise enhances our capacity to identify, analyse and respond to risks and emerging trends in institutions, industries and the financial sector.
Supporting judgment with information and analysis of risks to institutions, industries and financial stability
Access to timely and relevant information and data is integral to APRA producing wellfounded, risk-based decisions. Analysis provided through insightful reports, on our institutions, our industries, the financial sector and the broader economy, enhances our capacity to identify and respond to risks and emerging vulnerabilities. APRA also engages with others, and in particular agencies within the CFR, that provide insights which support the achievement of APRA’s mission.
Having efficient and effective frameworks that support core functions
APRA relies heavily on the skills and knowledge of its people and expects them to exercise professional judgment in their roles. Establishing and maintaining robust frameworks supports efficient and effective practices, and promotes high quality and consistent decisions.
Organisational effectiveness and infrastructure
|Have robust and efficient business support, transparent and accountable practices, and secure and reliable premises and systems.|
APRA does this by
Providing business support across APRA
To support APRA undertaking its functions, we maintain efficient and effective organisational frameworks and processes. These cover a range of areas including financial, security, information and project management.
Maintaining robust, effective and secure infrastructure
APRA’s infrastructure is the backbone of our core operations. APRA maintains appropriate standards for our workplaces and technology that are robust, effective and secure. Staff are encouraged and supported to optimise the benefits of our workplaces and systems by embracing different ways of working. APRA seeks to support anytime, anywhere mobility tools and practices to facilitate this.
Delivering required information and data in a timely and effective manner
APRA aims to present information and data in a timely and efficient manner, store it safely and reliably, and securely provide access to appropriate internal and external stakeholders anywhere, anytime. The collection, reporting and publishing of APRA statistics supports both our core activities and our function as a national statistical agency for the financial sector.
Aligning governance and accountability, internally and externally
APRA strives for clear accountabilities for business outcomes through efficient and effective internal governance frameworks. APRA adopts accountability practices that meet the spirit and intent of relevant Government policies and frameworks including those for internal audit, risk management, compliance and performance reporting.
Engaging transparently and effectively
APRA fosters active engagement with all relevant parties, internally and externally, on key matters. APRA engages with Government and other agencies on governance and accountability frameworks applying to APRA, and strive to clearly and effectively communicate expectations and the underlying reasons for our decisions, as appropriate. APRA ensures up-to-date, clear and accessible information and publications on prudential and supervision frameworks and activities are in the public domain.
APRA’s strategic initiatives
APRA’s priorities for change are captured in its four strategic initiatives. These initiatives represent programs of work that seek to strengthen APRA’s core functions and capabilities over the four year planning period.
Enhancing leadership, culture and opportunities for APRA’s people
|Enhancements that support leaders in sustaining a progressive, high performing and inclusive culture.|
This strategic initiative comprises a program of work to:
- Enhance our employee value proposition
- Build inclusive leadership that inspires outcomes
- Foster our desired culture
Attracting and retaining the high calibre staff needed to achieve APRA’s mission requires strong leadership and the promotion of a culture and practices that support its people achieving their potential. It is also important that APRA maintains appropriate overall relativities with employment conditions (financial and non-financial), in the financial services sector.
Enhancing APRA’s employee value proposition (EVP) is designed to improve the Enhancing leadership, culture and opportunities for APRA’s people Enhancements that support leaders in sustaining a progressive, high performing and inclusive culture. attractiveness of APRA as an employer. APRA’s EVP identifies the unique people policies, processes and initiatives that demonstrate our commitment to our people, covering areas such as recruitment, remuneration, career advancement and development, leadership practices, talent and succession planning, and flexible work arrangements.
Effective and inclusive leadership is integral in inspiring APRA staff towards achievement of desired outcomes. Strengthening leadership skills will assist engagement and the achievement of APRA’s purpose.
The culture of an organisation sets the tone for the workplace and the behaviours expected in achieving outcomes. Clearly articulating the culture APRA would like to foster, will enable internal frameworks to be amended and aligned to the achievement of the desired outcome.
Honing governance and workplace effectiveness
|Modernising data and analytical capabilities and fostering aligned, simplified and agile governance structures, workplaces and systems.|
This strategic initiative comprises a program of work to:
- Modernise APRA’s data and analytical capabilities.
- Enhance resource management practices.
- Maintain refreshed and reinvigorated workplaces and practices.
- Improve our risk and performance assessment and reporting capability.
- Embed simplified and aligned governance arrangements.
Aligned, simplified and agile governance, workplaces and systems enhance the efficiency and effectiveness of our people.
APRA is undertaking a multi-year program of work to transform the way we collect, store, access and publish data. The outcomes of the program will benefit a wide range of users across APRA and externally. APRA will become a more efficient business with end-to-end stewardship of data and access to advanced data analytics driving increased quality, depth and breadth of analysis to support better quality decisions.
APRA aims to implement an integrated system and processes which provide the structure for improved risk-based resource management.
This will include abilities to capture and review past efforts (to account for resource time spent on activities and to inform future planning) and to allow future resource scheduling.
APRA is to continue to refresh and reinvigorate its workplaces and practices. This work will build on past project successes to ensure that the investment made in APRA’s workplaces will continue to increase efficiencies across APRA.
Enhancing APRA’s existing reporting framework on key aspects of APRA performance and risk to support APRA in managing priorities, identifying organisational vulnerabilities, driving achievement of strategic objectives through assessing progress, and clarifying individual accountabilities in supporting outcomes.
APRA’s governance arrangements directly contribute to the efficiency and effectiveness of our operations. APRA seeks to increase the effectiveness and efficiency of its internal governance structures and practices.
Sharpening risk-based supervision
|Improving support for judgments, priority setting and supervisory intensity through risk assessment tools and more structured risk intelligence, benchmarks and oversight|
This strategic initiative comprises a program of work to:
- Refresh APRA’s supervision framework and practices.
- Inform judgments through clear risk appetite and strengthened risk intelligence.
- Formalise quality management practices.
- Refresh APRA’s licensing framework and practices.
Risk-based supervision refers to APRA’s core business of supervising the safety and soundness of regulated entities. APRA promotes sound, forward-looking risk assessment which is clearly linked to APRA’s risk appetite and corresponding priority setting, supervisory intensity and response.
APRA aims to comprehensively review and refresh its supervisory frameworks, guidance material and systems allowing supervisors to exercise (and evidence) professional judgments within agreed parameters and ensure practices are fit for purpose.
Risk appetite provides a framework within which staff are able to inform their judgments about the risks the organisation is prepared to accept or not. Sound judgments require adequate risk intelligence, which is gathered, analysed and prepared in a timely and efficient fashion. Improved financial analysis also drives better risk analysis and priority setting for supervisors.
A sound quality management framework is a key driver of organisational performance. APRA is to develop a framework which is fit for purpose, taking into account internal and external expectations. The framework will focus on strengthening existing controls and ensuring that there is operationally independent and effective challenge across the organisation on core supervisory risk judgments, with opportunities to institutionalise better practices and knowledge sharing.
APRA is to leverage the establishment of a centralised licensing team to enhance its licensing framework and practices. An enhanced licensing framework (including policies, guidelines and licence conditions) will appropriately balance financial safety and efficiency, competition, contestability and competitive neutrality, and promotion of financial stability in line with APRA’s risk appetite.
Building recovery and resolution capability
|Build a clear and effective failure framework underpinned by internal and external readiness|
This strategic initiative comprises a program of work to:
- Assist in the passage of the Crisis Management Bill.
- Develop a materially stronger prudential framework for managing failure.
- Improve APRA’s internal readiness to resolve failures and near-failures.
- Improve APRA’s internal readiness to administer the FCS.
- Improve recovery planning.
- Develop resolution planning.
The initiative seeks to develop a mature failure management framework for APRA and resources (powers, procedures, capability) to facilitate pro-active, prompt and orderly resolution of institutions when needed.
APRA aims to improve the Australian statutory framework for managing failures and crises, taking into account international lessons and policy developments, as recommended by the FSI.
APRA aims to improve the Australian prudential framework for managing failures and crises, through developing suitable prudential standards and guidance material to support the primary legislation.
APRA seeks to strengthen its operational readiness to resolve failures, near failures and administer the FCS.
APRA seeks to improve the readiness of regulated institutions to recover from severe stress by developing credible recovery plans, with a realistic and continuously reviewed menu of actions that can be practically implemented in stressed operating conditions.
APRA aims to develop a framework for establishing credible resolution plans, which it would use as a basis for resolving a failed institution. The plans would include a methodology for assessing critical functions, conducting resolvability assessments of relevant institutions based on a preferred resolution strategy, identifying pre-positioning measures that could help to improve an institution’s resolvability and developing the processes and guidance for reflecting preferred resolution strategies.
Roadmap for change
Each initiative includes a number of streams of work which have clear milestones for delivery within a broader change program.
Click for larger version
Risk oversight and management
Risk management is overseen by the Executive Board, and its supporting committees, in particular, the Risk Management Committee (RMC) 2. The RMC coordinates its activities with APRA’s Audit Committee. Both committees are comprised of two independent non-executive members and APRA’s Deputy Chairman.
APRA’s Enterprise Risk Management Framework (ERMF) is aligned with the best practice requirements of the Commonwealth Risk Management Policy. The framework comprises a Risk Appetite Statement, a Risk Management Policy, and an Incident Management Policy, together with risk categories, risk registers and registers of mitigating controls and treatment actions and monitoring processes that are designed to support risk management practices across APRA.
APRA’s ERMF is dynamic in nature. It establishes risk owners for each risk category who regularly review the risks for which they have responsibility along with updates on mitigating actions, and suggested changes to the ERMF. These are assessed and challenged where appropriate, and a quarterly report is developed on the status of APRA’s enterprise risks and how they relate to APRA’s risk appetite. This report is considered by the RMC, where feedback on risks and mitigating actions is obtained. APRA’s ERMF, including the Risk Appetite Statement, is reviewed on a regular basis.
2 The RMC has three members, the majority (including the chair) being independent (i.e. external appointees, not APRA executives). The RMC has a Charter that is reviewed and approved annually. It meets five times a year and formally assists the APRA Chairman and the Executive Board in their management of risks.
APRA’s financial resources are provided through the Government’s budgeting and related processes; the forward estimates are as set out in the table below:
In general terms, approximately 75 per cent of APRA’s cost base is attributable to employee costs, 20 per cent to supplier costs, and the balance is depreciation and amortisation.