The Australian Prudential Regulation Authority (APRA) has released the opening remarks of its chair, John Lonsdale, to the Senate Economics Legislation Committee.
Lonsdale said Australia’s financial system remains stable, supported by robust regulatory settings, which should provide confidence to Australian depositors, insurance policyholders, and superannuation fund members.
Lonsdale discussed several risks being monitored by APRA in 2024, such as geopolitical tensions, ongoing high inflation, and elevated mortgage interest rates, alongside significant cost of living pressures.
He also emphasised APRA’s close monitoring of household insurance access and affordability, especially considering rising losses from floods and other natural disasters.
Since February, APRA has implemented significant reforms, including the commencement of the Financial Accountability Regime (FAR) for ADIs on March 15, with implementation for the insurance and superannuation industries expected next year.
This scheme, administered jointly by APRA and the Australian Securities & Investments Commission (ASIC), aims to enhance risk governance by strengthening responsibility and accountability within APRA-regulated entities.
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Addressing operational outages and cyberattacks, Lonsdale reported that APRA has largely completed a review of all regulated entities’ compliance with the CPS 234 Information Security standard.
“Although remediation is still underway at some entities, this exercise has helped organisations to lift their cyber defences and data privacy protections for Australians,” he said.
He added that the regulator has also finalised guidance on CPS 230 Operational Risk Management, set to be published soon and effective from July 1, 2025. This standard aims to help organisations better understand their critical operations and third-party service providers and establish tolerance levels for potential business disruptions.
“APRA has responded to industry requests to ensure the regulation is effective and proportionate to the size and significance of the entity, including supervision intensity for certain elements of the standard,” he said.
Regarding climate-related risks, APRA is conducting a voluntary survey for its regulated entities to self-assess their practices against the regulator’s guidance on managing financial risks from climate change. This survey will provide insights into the progress entities have made since APRA released its practice guide in 2021.
In the superannuation sector, APRA is working to enhance transparency and ensure trustees act in the best interests of fund members. It will publish the results of the 2024 annual performance test in late August, assessing the long-term performance of superannuation products against tailored benchmarks.
Following this, the regulator will release detailed performance metrics, investment returns, and fees. Additionally, it will begin publishing more granular data on fund expenditures and investments by trustees.
Lonsdale also mentioned APRA’s support for the government’s regulatory initiatives grid and the development of a pilot version of APRA’s new digital Prudential Handbook.
“APRA will launch a pilot version of our new digital Prudential Handbook later this month, which organises more than 140 Prudential Standards, Guidance, and associated information into an easy-to-use and search format. In July, we will publish our latest Corporate Plan which will include an update on our policy and supervision priorities,” he said.
Meanwhile, APRA executive board member Suzanne Smith is calling on the life insurance sector to “think bigger.”
