In his keynote at the AFR Banking Summit, APRA chair John Lonsdale (pictured) started by drawing a vivid analogy between the unpredictable nature of cyclones and the current global financial climate.
He recalled the recent events in Queensland and New South Wales, where millions prepared for a cyclone, paralleling the anticipatory actions leaders must take in today’s volatile economic environment.
Lonsdale described a world where geopolitical unrest, including potential trade wars and ongoing conflicts in Eastern Europe and the Middle East, are creating significant uncertainty.
This environment is challenging traditional financial institutions which now also face threats from innovative technologies and new market entrants.
Reflecting on past crises, Lonsdale emphasised the critical role of governance.
“One need only think back to the financial services Royal Commission to be reminded of the relationship between bad governance and poor outcomes for both entities and their customers,” he said.
Despite improvements, he highlighted ongoing challenges: “Although overall standards of governance among APRA-regulated entities have risen since then, the link endures with almost 80% of entities subject to intensified APRA supervision having governance problems.”
APRA has initiated steps to update governance standards across industries. This month, the prudential regulator released a discussion paper outlining eight proposals aimed at bringing Australian standards in line with global best practices and higher community expectations.
“Waiting for a storm is an apt analogy for what’s occurring as Australian business and political leaders monitor a geopolitical maelstrom brewing overseas for which the trajectory is uncertain,” Lonsdale said.
APRA’s proposed changes include:
The consultation process for APRA's governance proposals is just beginning, with the organisation seeking input from a broad range of stakeholders to refine and adapt the governance framework effectively.
Lonsdale underscored the importance of these reforms in ensuring the stability and integrity of Australia's financial institutions.
Addressing international regulatory dynamics, Lonsdale discussed the impacts of policy shifts in major economies on Australia’s financial regulations.
He reassured stakeholders of APRA’s commitment to maintaining strong regulatory standards that align with global best practices while being tailored to Australia's unique context.
In concluding his speech, Lonsdale reiterated the essential role of governance in safeguarding the financial system.
“Well-governed institutions are likely to be more resilient in times of stress, while poor governance can create weakness that leads to misconduct, losses, and failures,” he said.
