APRA chair John Lonsdale outlines key changes for the regulator

Australian Prudential Regulation Authority (APRA) chair John Lonsdale looked back at the key changes for the regulator over the past two years as he discussed APRA’s 2021-22 Annual Report.

In his opening statement to the House of Representatives Standing Committee on Economics, Lonsdale outlined the recent changes at APRA and the Australian financial sector.

“One of the key constants in our updates to the committees … and our message to the Australian community is that the Australian financial system is fundamentally sound. However, in these uncertain times, APRA needs to be extra vigilant in managing the resilience of the system to protect depositors, insurance policyholders, and superannuation members,” Lonsdale said.

Lonsdale added that APRA recently finalised new requirements and guidance to strengthen the preparedness of insurers, banks, and superannuation funds to respond to crises.

“The reforms are the culmination of several years of policy development to ensure the financial system is better prepared to manage periods of stress,” he said. “In addition, we expect to publish a new cross-industry standard on operational risk management in the next month or so. This standard, CPS 230, is designed to strengthen the management of operational risk in the banking, insurance, and superannuation industries, including the management of contractual arrangements with service providers.”

APRA bids farewell to deputy chair

In his speech, Lonsdale noted APRA deputy chair Helen Rowell’s retirement from the regulator at the end of June after 21 years of service.

“Helen held a number of senior roles at APRA before becoming an executive board member in 2013,” he said. “Helen has made a significant contribution to APRA in her time here, especially in superannuation, where she oversaw the creation and implementation of APRA’s prudential framework for that industry.

“Helen was the first woman appointed as an APRA executive director, member, and deputy chair. She will be greatly missed by all who worked with her here, and we wish Helen all the best wherever the next stage of her career takes her.”

APRA’s current agenda

APRA currently focuses on embedding recent regulatory reforms, boosting operational resilience, and ensuring its regulated entities have sufficient financial strength to act as a buffer against any emerging financial stresses.

The regulator’s current key policy priorities include:

• completing key reforms to strengthen the financial and operational resilience of APRA-regulated entities, including in areas such as operational risk management and remuneration;
• focusing on transparency and efficiency in superannuation, with the annual performance test (which this year will incorporate hundreds more products compared with last year), alongside longer-term consideration of retirement income frameworks, with ASIC;
• continuing APRA’s plan to modernise the prudential architecture, a core strategic initiative designed to make the framework clearer, simpler, and more adaptable; and
• reviewing core standards, including governance and the regulation of conglomerate groups.

Meanwhile, the regulator’s key supervision priorities include:

• heightened supervision of cyber resilience through detailed assessments and rigorous pursuit of breaches;
• embedding the capital reforms for insurers and banks;
• holding trustees to account to improve outcomes for superannuation members; and
• addressing challenges in the availability, affordability, and sustainability of insurance.