Opening statement for Senate Economics Legislation Committee - February 2021

Renée Roberts, APRA Executive Director, Policy and Advice Division – Senate Economics Legislation Committee, Inquiry into National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 

Thank you for the opportunity to appear today. I am joined by my colleague, Gideon Holland, General Manager Policy. APRA has made a submission to the Inquiry, which we hope is helpful in providing some context. In some brief opening remarks today, we wanted to explain APRA’s role in the financial regulatory system, our approach to regulating bank lending and our response to the proposed reforms.

• Firstly, APRA’s role. As the prudential regulator of banks, APRA’s role is to ensure that there is confidence in the financial safety of individual banks and in the financial stability of the system overall. We do this in close collaboration with the conduct regulator, ASIC, and other financial agencies, including through the Council of Financial Regulators. 
• Secondly, APRA’s approach to regulating bank lending. APRA’s prudential standards are legally binding regulations, and are designed to ensure banks effectively manage the risks that they take. In lending, APRA’s standards aim to ensure banks effectively manage the credit risk of their loan portfolios, with prudent policies and practices. This means an emphasis on systemic lending issues at an institution level, rather than a direct focus on outcomes at an individual loan or customer level. These standards are supported by prudential guidance, which set out APRA’s expectations of sound practice in key areas. APRA’s prudential requirements are enforced through a range of formal and informal tools.
• Lastly, APRA’s response to the proposed reforms. As the Government has announced, APRA will continue to regulate ADIs in relation to our existing standards. As such, we are not planning any material changes to our prudential standards and guidance, on the basis of the current proposed reforms. We will continue to supervise ADIs to ensure they take a prudent approach, within a stable financial system.

With those opening remarks, we are happy to take your questions.