The Australian Prudential Regulation Authority (APRA) has published its latest Corporate Plan outlining how it will maintain the strength and stability of Australia's banks, insurers and superannuation trustees over the next four years.
In addition to APRA's strategic priorities, this latest Corporate Plan incorporates - for the first time - APRA's annual policy and supervision priorities, as well as a new inclusion of data priorities.
By combining the formerly separate publications, APRA seeks to enhance transparency and assist regulated entities to plan ahead.
Among APRA's top priorities in the 2024-25 Corporate Plan are:
- further strengthening bank capital and liquidity standards to reflect lessons learned from last year's global banking turmoil;
- increasing minimum standards for operational resilience through the implementation of new Prudential Standard CPS 230 Operational Risk;
- raising industry standards on cyber risk management;
- developing APRA's first system stress test to model and assess interconnections across the financial system;
- lifting expectations of entities to consider the financial impacts of climate risk in decision-making;
- partnering with stakeholders to reduce the protection gap for household insurance; and
- working with the Australian Securities and Investments Commission to ensure superannuation trustees meet their requirements under the retirement income covenant.
Internally, APRA will continue to invest in its people to ensure they retain the necessary skills and experience in an increasingly complex and rapidly evolving operating environment. This includes using the additional funding in the 2024-25 Federal Budget to strengthen APRA's data collection and analysis capabilities.
APRA Chair John Lonsdale said the plan aimed to ensure the continued financial and operational resilience of APRA-regulated entities, while also responding to new and heightened risks.
"At a time of considerable geopolitical volatility and with an uncertain economic outlook, it's vital that banks, insurers and superannuation trustees are prepared for whatever potential challenges could arise.
"Over the coming four years, APRA will step up its focus on operational and cyber-resilience to ensure our regulated entities are equipped to maintain critical financial services in a world that is becoming more interconnected and dependent on digital technologies. We will delve more deeply into that interconnection by examining the links between banking and superannuation and the possible contagion risks that arise from that relationship.
"On the policy front, having spent more than a decade building up the strength of the prudential framework, APRA is now in a position to focus on maintaining that strength. While we plan to have a broad approach focused on adjusting or recalibrating existing settings, there are exceptions, including reform of our prudential standards on governance over the next 12 months.
"In supervision, we will retain a close watch on risk culture and risk management, with climate change and crisis preparedness to be areas of particular focus over the next year. As always, we will back up our approach with a strong appetite for taking enforcement action where required to ensure that entities comply with the law and the community is protected," Mr Lonsdale said.
The 2024-25 Corporate Plan, including APRA's policy, supervision and data priorities, is available on the APRA website at: APRA Corporate Plan 2024-25.
