APRA to modernise the prudential architecture

Regulator to make framework cleaner and simpler

APRA to modernise the prudential architecture


By Mina Martin

The Australian Prudential Regulation Authority (APRA) has outlined its approach to modernising the prudential architecture, as it works to make the regulatory framework clearer, simpler, and more adaptable in a rapidly changing economic and technological environment.

APRA’s approach for the multi-year program has been outlined in an information paper released on Monday, so banks, insurers, and superannuation funds would know what to expect from the program over the coming years, including an upcoming new guide for directors on bank boards.

The paper also sets out the regulator’s intention to shortly begin industry engagement on key initiatives in the program through workshops and surveys, commencing with the main industry associations.

APRA said the program will be focused on ensuring prudential standards and guidance are easier to navigate, understand, and implement, exploring how to use technology to better support regulation, and developing new approaches to tackle emerging risks and new business models on the regulatory perimeter.

Over 2022, APRA has been building the foundations for the program, with several modernisation initiatives already underway, including its first prudential standard to strengthen operational resilience, which will replace five current standards.

APRA Chair Wayne Byres said that since the regulator’s creation in 1998, the prudential framework has become more complex, and in turn, more challenging for entities to follow, with 140 prudential standards and prudential practice guides now covering the five APRA-regulated industries – as well as letters, information papers, and FAQs.

“We need to ensure the framework is clear, simple, and adaptable, to continue to be effective in setting minimum standards for banks, insurers, and superannuation funds as technology, business models, and community expectations change,” Byres said. “Our end-goal is a digital framework that will be easier for industry to understand and comply with, and for APRA to supervise and maintain – and ultimately to better protect Australians’ financial interests.”

Click here to access the information paper.

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