Introduction from Renée Roberts

Welcome to the final edition of APRA Insight for 2020.

As we prepare to say goodbye to an immensely difficult year for many Australians, APRA is preparing to say a rather fonder farewell to Executive Board Member Geoff Summerhayes.

After five years overseeing APRA’s supervision of life, general and private health insurance, and leading our response to emerging and accelerating risks such as cyber and climate change, Geoff will be leaving APRA at the end of December.  This edition of Insight contains an interview with Geoff, reflecting on his time at APRA, what he’s learned, as well as where both APRA and industry can make further improvements to strengthen protections for bank depositors, insurance policyholders and superannuation members.

One of the strengths Geoff brought to APRA has been a willingness to challenge orthodoxies and constantly ask whether there might be a different or better way to do things. At a time when the financial sector is experiencing enormous and rapid changes, accelerated in some areas by the pandemic, the ability to quickly adapt to changing conditions and find new, more efficient ways of working will be crucial for all APRA-regulated entities.

So far, APRA-regulated entities have responded well to the impacts of COVID-19, and Australia’s financial system remains in sound shape. But other challenges, many structural and long-term, remain in play. A growing number of neobanks and “buy now, pay later” platforms are positioned to take market share from incumbents with innovative new products and services. The superannuation sector faces a range of potentially game-changing policy and regulatory reforms aimed at dealing with chronic underperformers and boosting member outcomes. The insurance industry is increasingly exploring the use of artificial intelligence and telematics to sharpen its underwriting, lower costs and better manage risks.

As Geoff himself once noted in a speech to private health insurers: “a proud history doesn’t guarantee a prosperous future”. Although it is ultimately up to boards to guide their companies successfully through turbulent times, APRA also has a role to play in making sure bank depositors, insurance policyholders and super members are protected. With our policy agenda now out of the COVID-related deep freeze, we are once again focused on strengthening the prudential framework to bolster entity resilience. As APRA Chair Wayne Byres observed recently, our top priorities are finalising our prudential standard on remuneration, and completing long-standing efforts to make the bank capital framework more risk-based, flexible, transparent, comparable and enshrine a system that is unquestionably strong. Another major priority is moving forward with the Superannuation Data Transformation, which will underpin our work to drive better industry practices and improve member outcomes.

Lifting the comprehensiveness and transparency of APRA’s data collection across all our regulated industries is a long-term goal, and in this edition of Insight, we explore the findings of two of our most recent collections: the Pandemic Data Collection, which delves into the impacts of the superannuation Early Release Scheme; and our data collection on loan repayment deferrals granted to borrowers impacted by COVID-19.

We examine the importance of a good skills matrix in improving board governance, and APRA Explains looks at the issue of “restricted words” – what are they, why they are restricted, and what’s the process for seeking permission to use them?

On behalf of APRA, we wish everyone a happy festive season, and here’s to hoping 2021 is a little less challenging for all of us!