APRA unveils plans to modernise prudential architecture

making prudential standards and guidance easier to navigate, understand, and implement;
exploring the use of technology in support of better regulation; and
developing new approaches to tackle emerging risks and new business models on the regulatory perimeter.

The goal of these initiatives, APRA said, is to ensure that the framework maintains its ability to “underpin financial safety and stability in a rapidly changing economic and technological environment.”

“Since APRA’s creation in 1998, the prudential framework has expanded and evolved in response to new risks, changes in legislation and developments in the external environment,” said APRA chair Wayne Byres. “With 140 prudential standards and prudential practice guides now covering the five APRA-regulated industries – as well as letters, information papers and FAQs – the framework has become more complex, and in turn more challenging for entities to follow. We need to ensure the framework is clear, simple and adaptable, to continue to be effective in setting minimum standards for banks, insurers and superannuation funds as technology, business models and community expectations change.”

The information paper also revealed what banks, insurers and superannuation licensees can expect from the program, including an upcoming new guide for directors on bank boards.

“Our end-goal is a digital framework that will be easier for industry to understand and comply with, and for APRA to supervise and maintain – and ultimately to better protect Australians’ financial interests,” Byrnes said.

APRA commenced work on the program last year and has spent 2022 building its foundations. Several of APRA’s modernisation initiatives are already underway, including the regulator’s first prudential standard meant to bolster operational resilience.