Like ASIC, the Australian Prudential Regulation Authority (APRA) published its Corporate Plan for 2021- 25 last week. The Corporate Plan is focused on two strategic themes: “protected today” and “prepared for tomorrow” relating to the evolution of Australia’s financial system. Not only paying close attention to financial and operational resilience of Australian banks, insurers and superannuation funds, it also reflects the sentiments of ASIC’s Corporate Plan to scrutinise the impact of technology and digitisation. Both plans demonstrate that echoes of The Hayne Report are still loud and clear in the financial services sector and we outline the key takeaways from APRA below.

Read our recent outline of ASIC's strategic priorities as detailed in its Corporate Plan 2021-25, and what these mean for financial services litigation in Australia.

Protected today

APRA recognises that, in order for economic activity and prosperity to exist, Australians must have confidence in the safety and stability of the financial system. APRA’s Chair, Wayne Byres, remarked in his foreword to the Corporate Plan, that “In its core prudential supervision role, APRA remains committed to ‘protecting the Australian community today’. In particular, APRA will continue to actively support COVID-19 response activities where needed, within its broader efforts to promote a stable, efficient and competitive financial system that the Australian community can have confidence in.”

APRA’s primary focus will remain ensuring Australians’ financial interests are “protected today”, meaning APRA will continue to devote the majority of its time and resources to its central role of preserving the financial and operational resilience of Australian banks, insurers and superannuation funds. APRA plans to do this by:

1. Targeting supervisory activities to those issues of greatest risk.
2. Modernising the prudential architecture to ensure it remains fit for purpose.
3. Continuing to drive greater data-driven decision-making.
4. Delivering a modern and flexible working environment and maintaining a high-calibre workforce capable of responding to new challenges as they arise.

Prepared for tomorrow

The “Prepared for tomorrow” aspect of APRA’s Corporate Plan recognises the need to respond to the rapid evolution of Australia’s financial system.

In the foreword to the Corporate Plan, Mr Byres put it as follows: “…being a forward-looking supervisor, APRA must also ‘prepare for tomorrow’. The financial landscape is evolving rapidly, particularly in response to the impacts of technology and digitisation that are changing society more broadly. APRA will therefore work in close partnership with its regulatory colleagues and other key stakeholders, both domestically and internationally, to make sure that the prudential architecture remains fit for purpose into the future.”

Specifically, APRA plans to “prepare for tomorrow” by:

1. Dedicating regulatory attention to the evolving financial landscape in Australia, including understanding the impact of new financial activities and participants.
   
   This goal arises from the rapid evolution of the global financial landscape, including the emergence of new business models, new technology and the digitisation of finance. APRA recognises that Australia’s prudential architecture must evolve and adapt. APRA will be focused on supporting financial innovation and growth, while also ensuring that an appropriate and adapted regulatory framework exists to promote financial safety and stability within the system.
   
   To achieve these goals, APRA plans to actively look ahead to understand and respond to the impact of new financial activities and business models, engage closely with peer regulatory agencies both domestically and internationally, and identify opportunities offered by new technology.
2. Helping to find solutions to important challenges, such as: superannuation retirement income products; insurance accessibility and affordability for Australians; and the financial risks associated with climate change.
   
   Retirement outcomes: APRA plans to continue to work with Government, as well as other Commonwealth agencies and industry stakeholders, to achieve improved outcomes for retirees within a high performing superannuation system.
   
   Insurance accessibility and affordability: APRA also plans to work with key stakeholders in Government, other regulatory agencies and the insurance industry to seek to address, and provide advice on, issues with accessibility and affordability of insurance with the general, life and private health insurance sectors.
   
   Financial risks of climate change: APRA will endeavour to help entities to understand and manage the financial risks associated with climate change. APRA plans to do this by finalising prudential guidance, conducting climate vulnerability assessments, data gathering and further engagement with Council of Financial Regulator (CFR) agencies, industry bodies, research organisations and global regulatory peers.
3. Ensuring it continues to adopt the latest regulatory tools, techniques and practices.
   Going forward, APRA will continue to look to adopt the latest regulatory tools, techniques and practices to promote the achievement of prudential outcomes. APRA will do this within areas including specialist regulatory services, enforcement actions, and transparency and resolution.

The future approach

This year the Corporate Plan, “widens APRA’s regulatory gaze and activities.” Like ASIC, APRA’s updated Corporate Plan recognises the paramount importance of APRA’s role in ensuring financial stability, particularly with the ongoing COVID-19 pandemic.

APRA’s strategic objectives, particularly those under the banner of “prepared for tomorrow”, unsurprisingly focus on current and future trends and risks which will include the growing spectre of cyber-threats, continued access to affordable insurance, or the emergence of new technologies and market disrupters.