What are APRA's priorities in 2021?

The Australian Prudential Regulation Authority (APRA) has released its policy and supervision priorities for 2021, which focus on further enhancing the Australian financial system's resilience and crisis readiness.

APRA suspended a majority of its planned policy and supervision agenda in March 2020 to focus on addressing the impacts of COVID-19. Now, its proposed priorities for 2021 focus on recovery.

APRA's key policies for 2021 include:

• Finalising and implementing a revised prudential standard on remuneration, a key Royal Commission recommendation that remains outstanding;
• Strengthening crisis preparedness, including the development of a new prudential standard on resolution and recovery planning, taking into account the lessons and learnings of the past 12 months;
• Updating prudential standards on operational risk, governance, and risk management and consulting with industry on guidance for climate change financial risk;
• Completing the ongoing review of the capital framework for authorised deposit-taking institutions to fully implement “unquestionably strong” capital ratios and the Basel III reforms;
• Supporting implementation of the government's Your Future, Your Super reforms to improve member outcomes as well as progressing a range of enhancements recommended by APRA's post-implementation review of the original superannuation prudential framework introduced in 2013; and
• Continuing work on strengthening the capital framework for private health insurers.

Meanwhile, the regulator's supervision priorities include:

• Maintaining financial system resilience through increased action on crisis readiness, including recovery and resolution planning and stress testing;
• Increased scrutiny of entities' cybersecurity capabilities;
• Embedding the new remuneration standard, conducting a risk culture survey, undertaking a range of GCRA-related supervisory reviews and deep dives, and working to close risk governance issues currently requiring capital overlays; and
• Addressing areas of MySuper underperformance, taking enforcement action where appropriate and providing greater transparency through the expansion of the heatmaps to include Choice products.

APRA chair Wayne Byres commented: “Last year, the industry demonstrated an ability to adapt and continue serving the needs of customers, despite a number of severe operational challenges and disruptions.

“The robust response to date is not a cause for complacency but underlines the value of an ongoing regulatory program that seeks to identify risks and put in place appropriate mitigation strategies to protect the interests of depositors, policyholders and fund members. As a forward-looking safety regulator, APRA's priority is to maintain a financial system that is resilient and able to fulfil its important role in the Australian economy, whatever the circumstances.”