The Australian Prudential Regulation Authority (APRA) has launched a new supervisory system as part of its efforts to bolster its focus on non-financial risks for banks, insurers, and pension funds, according to Reuters.
The update to the regulator’s model for assessing risks comes as a result of emerging prudential threats, including the missteps of corporate governance, accountability, culture, remuneration, and cybersecurity, said the APRA.
A letter issued by the prudential regulator to banks, insurers, and funds noted that the newly introduced “risk and intensity” system will take over from the “probability and impact of failure” models that APRA has relied on since 2002.
“The new model ... and its design features ensure greater elevation of non-financial risks while preserving the importance of financial resilience,” APRA explained in the letter. An organisation’s score will determine where it falls within a five-stage system of supervisory intensity. For example, Stage 1 will require “routine” supervision, and the degree of oversight increases from there.
APRA stated that assessments would be conducted confidentially and, afterwards, entities would be informed of their new risk ratings. This new system should be completed by June 2021.
