APRA chair discusses financial system initiatives

The chair of APRA, John Lonsdale, has told the federal government what measures the regulator has taken to maintain the safety and soundness of the Australian financial system.

In an opening statement to the Senate Economics Legislation Committee on Thursday, Lonsdale (pictured above) said that APRA had released its latest corporate plan last August, which detailed its priorities in the next four years.

APRA’s strategy considered pressing factors and risks in the global financial industry such as the rise in interest rates, high inflation, geopolitical instability, the growing threat of cyberattacks and scams, and the increased frequency of natural disasters linked to climate change.

The regulator’s initiatives regarding these issues included the following:

• Addressing system wide risks by enhancing cross-industry stress-testing
• Heightened focus on operational resilience, including cyber resilience, crisis management and operational risk management, to maintain the continuity of critical financial services
• Taking lessons from the overseas experience in March to strengthen the banking system further, with a focus on targeted improvements to ensure that Australian banks’ liquidity and capital buffers work as intended and that stress of one entity doesn’t have an outsized impact on the system
• Climate-related financial risks, including a Climate Vulnerability Assessment for general insurers and embedding climate risk in APRA’s approach to supervision
• Improving superannuation transparency to provide members with enhanced insights about investment performance and increasing APRA’s focus on retirement outcomes.

Lonsdale said APRA would continue its plans to modernise and bring about improved industry supervision and transparency.

“Our efforts to modernise the prudential architecture, plus cooperation with peer regulators such as with Australian Securities & Investments Commission (ASIC) on how we administer the inbound Financial Accountability Regime (FAR), are examples of where we are considering how to build efficiency in regulatory operations,” said Lonsdale.

Lonsdale also highlighted APRA’s recently released annual report for 2022-2023 which showcased the activities and performance of the regulator as well as the review by the Financial Regulators Assessment Authority (FRAA) which said APRA had successfully regulated the banking, insurance, and superannuation industries.

“As ever, protecting the financial interests of Australians in such ways remains our purpose at APRA,” said Lonsdale.

APRA is the prudential regulator of the financial services industry and is tasked with supervising banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry.

What do you think about APRA’s initiatives? Let us know your thoughts in the comments below.