APRA oversees Australia’s authorised deposit-taking institutions (ADIs), general, life and private health insurers, reinsurers, friendly societies and most of the superannuation industry. 

We regulate these entities through five core functions: Policy, Licensing, Supervision, Enforcement and Resolution.

Additionally, APRA is the national statistical agency of the Australian financial sector. We collect data both for APRA’s own uses and on behalf of the Reserve Bank of Australia and the Australian Bureau of Statistics. Our data collection supports our supervisory work and informs policy development.

Our core functions provide the foundation for delivering on APRA’s mandate and determine the types of interactions APRA has with its stakeholders. One of the enablers of APRA’s performance is its coordination and engagement with peer financial regulators, government agencies and other standard setting bodies.

Policy

APRA’s policy function designs and maintains the prudential framework comprising relevant legislation, prudential standards and guidance. The prudential framework sets the minimum requirements that entities must meet and provides the baseline for APRA’s supervision activities. When APRA proposes amendments to the prudential framework, there is typically a period of formal, public consultation with industry and other stakeholders about the proposals. APRA then considers the feedback from these consultations when finalising its policy positions. 

APRA’s policy agenda recognises that APRA must respond to an external environment that continues to evolve according to developments in international standards, as well as shifts in government priorities and community expectations.

By design, APRA's prudential framework is proportionate and risk based. APRA applies regulation only where necessary to achieve its prudential objectives. Smaller entities are subject to fewer or simpler requirements, and APRA's prudential standards avoid overly prescriptive requirements which would otherwise stymie innovation and increase compliance costs. This approach seeks to minimise any undue costs of regulation for industry. 

Licensing

Before an entity can conduct a banking, insurance or superannuation business in Australia, it must be licensed by APRA. The process of granting an APRA licence aims to ensure that the entity has the financial and operational strength to comply with prudential regulatory requirements, and that the entity will – under all reasonable circumstances – be able to keep its financial promises to customers. As part of the licensing process, APRA seeks to balance financial safety with allowing for a competitive and innovative system, both for new entrants and established market participants.  

The rules and requirements for starting a regulated entity in Australia vary depending on the type of business. 

Supervision

APRA continually oversees the activities of regulated entities to ensure they are complying with the requirements of the prudential framework and to encourage them to adopt better practices. This ‘supervision’ function is carried out through direct, often face-to-face, interaction between APRA supervisors and entities.  

APRA’s vision is based on excellence in supervision. Our supervision function empowers APRA supervisors to identify significant risks to entities and the wider financial system, and to respond quickly and effectively.  

APRA takes a proportionate approach to supervision. Entities that pose greater risks to the financial system are subject to more intense levels of supervision. This is important to help smaller entities compete, without compromising APRA’s prudential objectives. For example, smaller entities usually have simpler regulatory requirements and a reduced reporting burden.

A key part of the supervision process is the data that entities report to APRA – for example, on their financial position. Our supervisors analyse this data to work out where entities are strong, and where risks may lie. APRA also undertakes regular reviews and assessments of entities.

If APRA identifies risks during the supervision process, it intervenes early to find a solution before an entity’s ability to meet its financial obligations is threatened. However, given that no supervisory process can guarantee no problems, APRA’s supervision function includes a focus on strengthening entities’ crisis-readiness. Effective crisis recovery plans are critical to making sure entities are prepared for periods of financial stress and can recover from financial loss, without taxpayer support.

Enforcement

The effectiveness of prudential supervision depends on entities knowing that APRA is prepared to take firm action where prudential risks are not being properly addressed. Enforcement is therefore a key part of APRA’s regulatory toolkit. Our enforcement powers range from information collection to more coercive and intrusive measures.

In most situations where an entity is not meeting APRA’s requirements, we are able to use non-formal tools to achieve APRA’s prudential outcomes - such as requiring additional reporting to assist our understanding of the issues or conducting an onsite review. The use of non-formal tools is particularly effective where entities are willing to work openly and cooperatively with APRA to promptly fix problems or address concerns.

APRA has a range of tougher, formal powers it can use to address problems when entities or individuals are not being cooperative. APRA’s enforcement powers can also be used to hold entities and individuals to account for their conduct. For example, APRA can conduct investigations, direct entities to take or refrain from particular actions, impose conditions on the way a business operates, ban individuals from working in a regulated industry (banking, insurance, superannuation), commence civil proceedings or refer matters for criminal prosecution.

APRA can use its formal enforcement powers well before any risk – whether financial, operational or behavioural – poses an imminent threat to an entity’s financial operations. APRA also uses formal enforcement powers to set a public example to deter unacceptable behaviour and encourage compliance across the wider industry.

APRA can use one or any combination of its powers and will not hesitate to take enforcement action when appropriate, including where the use of non-formal tools is not producing satisfactory outcomes. 

Resolution

The failure of an entity is rare in Australia; however, APRA cannot guarantee a zero-failure rate. To do so would put severe limitations on an entity’s ability to take risks, such as lending or investing money.

In the unlikely event that an entity does fail, APRA’s resolution function ensures it can be exited from the industry in an orderly manner, with little or no loss to customers, and minimal disruption to the financial system. This orderly exit of a failing entity is known as 'resolution'.

APRA’s goal during resolution is to limit the financial impact of an entity’s failure. APRA regularly tests and continually improves its capacity to resolve failures and near-failures in an orderly manner.

In the unlikely event that an entity fails, the Australian Government provides an extra layer of protection to depositors of banks, credit unions and building societies, and most policyholders of general insurers, through the Financial Claims Scheme.

Data collection

APRA collects, analyses and publishes data for the Australian financial sector. We collect data to support APRA’s core supervisory work and inform policy development. APRA also shares data with other government agencies including the Australian Treasury, Reserve Bank of Australia (RBA), Australian Bureau of Statistics (ABS) and the Australian Securities and Investments Commission (ASIC). Accurate, timely and sufficiently granular data is essential to safeguard the financial system’s soundness and stability.

Collaboration and engagement

APRA routinely engages with key domestic and international regulators in a range of bilateral and multilateral forums. We are an active participant in international forums and standard setting bodies and engage closely with entities and other domestic stakeholders through various channels.