APRA releases its policy and supervision priorities for 2022

The Australian Prudential Regulation Authority (APRA) has released its policy and supervision priorities for the next 12 to 18 months. Consistent with APRA’s 2021-2025 Corporate Plan, key priorities are forward-looking and centred around APRA’s two strategic themes: “protected today” and “prepared for tomorrow”.  

The annually released documents provide information on APRA’s agenda so that banks, insurers, superannuation trustees and other stakeholders can prepare and proactively engage with APRA on key priority areas.

While continuing to focus on ensuring financial stability in the face of COVID-19, APRA’s latest priorities feature a heightened emphasis on new and emerging financial risks, practices and business models that are testing traditional regulatory boundaries and supervisory practices. 

In response to these changes, which include the rapid digital evolution of the financial system, APRA will this year commence a major multi-year initiative to modernise its prudential architecture.

Other key policy priorities for 2022 include:

• improving crisis preparedness, including finalising two new prudential standards on contingency and resolution planning;
• implementing the bank capital reforms that were largely finalised in 2021, to embed “unquestionably strong” capital ratios and the Basel III reforms;
• strengthening core requirements for strategic planning and member outcomes in superannuation, to align with and reinforce the Government’s Your Future, Your Super reforms; and
• completing comprehensive reforms to the insurance capital standards, primarily to ensure they align with the new accounting standard AASB17. 

APRA will also continue to work closely with Treasury and the Australian Securities and Investments Commission to implement the proposed Financial Accountability Regime, which expands Banking Executive Accountability Regime to insurance and superannuation.

In the area of supervision, APRA’s top priorities include:

• rectifying sub-standard industry practices in superannuation and eradicating unacceptable product performance;
• cyber risk preparedness and responsiveness across all industries that APRA regulates;
• a continuing focus on risk culture, including rolling out a risk culture survey to benchmark perceived risk behaviours and the effectiveness of risk structures within entities; 
• upgrading contingency and continuity frameworks, particularly in the banking sector; and
• ensuring sound insurance principles are applied in the insurance industries, with a focus on availability, affordability and sustainability of insurance.

APRA Chair Wayne Byres said APRA’s 2022 priorities are designed to counter the current risks regulated entities face, while ensuring they are well-prepared for future challenges.

“As the financial sector evolves, APRA’s priorities also need to change. At a time when the digitalisation of finance is accelerating, business models are changing and innovation is testing traditional regulatory boundaries and supervisory practices, now is an appropriate time to review whether the prudential architecture remains fit for purpose. 

“In modernising the prudential architecture, we will seek to ensure the prudential rules are easier to understand, help to enable new regulatory technologies, and are adaptable to innovation in the digital economy.

“While the financial system has demonstrated its resilience throughout the pandemic, COVID-19 has underlined the potential for unexpected shocks to emerge at any time. With that in mind, a substantial emphasis of our policy and supervision agenda this year is bolstering entities’ ability to withstand shocks, whether it be financial or operational. We will also continue to force persistent underperformers in the superannuation industry to quickly lift their standards or exit the industry.

“Although our strategic priorities may change over time, our core purpose remains constant: to ensure the financial system remains stable, efficient and competitive, and the financial interests of Australians are protected,” Mr Byres said.

Copies of APRA's Policy and Supervision Priorities are available below: