The Australian Prudential Regulation Authority (APRA) has outlined its approach to modernising the prudential architecture – a core strategic initiative to make the design of the regulatory framework clearer, simpler and more adaptable.
In an information paper published today, APRA outlined plans for its multi-year program to modernise the architecture of prudential standards and guidance for banks, insurers and superannuation funds.
The program, which commenced last year, is intended to ensure the framework continues to underpin financial safety and stability in a rapidly changing economic and technological environment.
APRA will achieve this through a series of initiatives focused on:
- Better regulation – ensuring prudential standards and guidance are easier to navigate, understand and implement;
- Digital first – exploring how to use technology to support better regulation; and
- New risks, new rules – developing new approaches to tackle emerging risks and new business models on the regulatory perimeter.
Over 2022, APRA has been building the foundations for the program and engaging with international regulatory peers. Several modernisation initiatives are already underway, including APRA’s first prudential standard to strengthen operational resilience (which will replace five current standards).
APRA Chair Wayne Byres said: “Since APRA’s creation in 1998, the prudential framework has expanded and evolved in response to new risks, changes in legislation and developments in the external environment.
“With 140 prudential standards and prudential practice guides now covering the five APRA-regulated industries – as well as letters, information papers and FAQs – the framework has become more complex, and in turn more challenging for entities to follow. We need to ensure the framework is clear, simple and adaptable, to continue to be effective in setting minimum standards for banks, insurers and superannuation funds as technology, business models and community expectations change.
“Our end-goal is a digital framework that will be easier for industry to understand and comply with, and for APRA to supervise and maintain – and ultimately to better protect Australians’ financial interests,” Mr Byres said.
Today’s information paper sets out what banks, insurers and superannuation licensees can expect from the program over coming years, which includes an upcoming new guide for directors on bank boards.
It also outlines APRA’s intention to shortly begin industry engagement on key initiatives in the program through workshops and surveys, commencing with the main industry associations.
A copy of the information paper is available below: