Australian Prudential Regulation Authority (APRA) Chair John Lonsdale has called for increasing interconnectedness in the financial system.
In a speech to the Financial Services Institute of Australasia (FINSIA) The Regulators 2023, Lonsdale delved into the challenges facing the Australasian financial services industry and how regulators and the rest of the rest of the industry address these issues.
Lonsdale said that the global financial system has become more interconnected due to technological and communication advancements. The rise of cyber security issues, for example, has promoted APRA to work closely with other regulators and government agencies to assist in the aftermath of several high-profile cyber issues.
“New innovations are delivering benefits to businesses and consumers, including cost-savings, efficiency, and convenience. But the links they foster also deepen the risks that need to be identified and managed. Further complicating matters, emerging digital technologies often straddle international and regulatory boundaries or fall between them entirely. No business or regulator can address these risks in isolation,” he said.
In his speech, Lonsdale reaffirmed APRA's commitment to ensuring insurers, banks, and superannuation trustees have the systems, processes, and expertise needed to prepare for cyber attacks.
For cyber risks, Lonsdale said APRA intensifies its supervision, insists upon remediation plans, and takes enforcement action when an APRA-regulated entity seeks ways to improve its cyber resilience.
The regulator has also improved operational resilience standards, giving APRA-regulated entities until mid-2025 to comply with the requirements of the new standard, CPS 230.
“Although the new standard isn't in place for another 18 months, there are things entities can do now. Mapping out critical operations and identifying material service providers is a practical initial step, as is building organisational awareness. APRA will continue to work closely with entities to prepare them for the implementation of the standard and will issue additional guidance early next year,” Lonsdale said. “Related to operational resilience is APRA's ongoing focus on governance, risk culture, remuneration, and accountability. This includes our work to increase the focus of boards and senior managers on non-financial measures such as community outcomes and sharpened accountability to prevent poor outcomes.”
See the rest of APRA's recent regulatory actions and plans, along with the rest of Lonsdale's speech, on the APRA website.
In other news, APRA executive board member Suzanne Smith recently called for improving the general insurance industry's financial health.
