Australian Prudential Regulation Authority (APRA) chair John Lonsdale briefed the Senate Economics Legislation Committee on the regulator’s ongoing efforts
to ensure the resilience of Australia’s financial institutions and protect the interests of policyholders, deposit holders, and superannuation fund members.
Lonsdale (pictured) stated that Australia’s financial system is fundamentally stable, benefiting from prudential standards refined over decades.
However, he cautioned that financial services face a complex set of risks, including economic volatility, geopolitical tensions, and inflationary pressures. Cybersecurity and operational resilience remain prominent concerns as firms increase their reliance on digital systems.
In insurance, Lonsdale said APRA is addressing ongoing concerns around the affordability and availability of coverage. This includes ongoing collaboration with government and industry stakeholders through initiatives like the Hazards Insurance Partnership, which focuses on managing risks tied to natural disasters.
Lonsdale said Australia’s growing superannuation pool, which plays a vital role in retirement security, is a focal point for APRA.
Following the introduction of the best financial interests duty (BFID), APRA has increased oversight of trustee expenditures.
The regulator’s recent data collection exercise reviewed over 40,000 expenditure items to assess compliance with BFID. Categories such as travel, entertainment, and conferences are under scrutiny, particularly where expenditures lack a clear benefit to members.
Two enforcement cases against trustees are currently before the courts, underscoring APRA’s focus on enforcing compliance.
The regulator also plans to issue a discussion paper soon on governance practices for regulated entities, including board accountability and structural improvements.
The Financial Accountability Regime (FAR), administered jointly with the Australian Securities and Investments Commission (ASIC), will extend to insurers and superannuation trustees in March 2025, following its earlier implementation in the banking sector.
APRA is developing Australia’s first comprehensive financial system stress test, which will examine the interconnections between banks and superannuation funds. This initiative aims to assess how risks might spread across sectors in a crisis.
The regulator has also released findings from its second voluntary climate risk survey, which assesses how institutions manage and disclose financial risks associated with climate change.
Internally, APRA is enhancing its technological and supervisory capabilities, ensuring it remains equipped to address emerging risks in a changing financial landscape.
