SYDNEY, Oct. 29 -- Australian Prudential Regulation Authority issued the following media release:
Good morning.
Thank you for the opportunity to appear before you today.
Joining me for the first time today is David Bradbury, the new APRA Deputy Chair with responsibility for overseeing the superannuation industry. I am pleased to acknowledge the recent promotion of Therese McCarthy Hockey to joint Deputy Chair; Therese also joins me today, along with APRA Member, Suzanne Smith.
I want to begin by informing Committee members that Australia's financial system remains strong and stable, underpinned by robust prudential regulation and supervision. At a time of significant political and economic uncertainty, a sound financial system is even more important.
However, the global operating environment is more uncertain than it has been for many years. The risk of a significant market shock or correction remains, requiring continued vigilance and preparedness.
Many key financial risks are coming from offshore. Geopolitical threats to financial stability associated with armed conflicts, trade restrictions and great power competition remain elevated. Government debt and bond yields are high in several major economies, while risk premia remain low in parts of global markets. A sharp repricing could tighten financial conditions and have flow-on effects in Australia.
AI is emerging as one of the fastest growing operational resilience risks for APRA-regulated entities. While AI offers major efficiency and innovation benefits, its rapid development is increasing cyber threats and testing whether entities' governance, risk management and security practices can keep pace.
Domestically, the environment has shifted as the housing sector and housing lending activity has cooled. We know many households are feeling significant cost-of-living pressures from inflation and higher interest rates. Most borrowers remain resilient and lending standards are sound, but we are watching lending standards and credit conditions closely.
We also recognise that shocks could occur at the same time and amplify one another. Geopolitical events can affect energy prices, inflation and markets while increasing cyber and operational pressures. Institutions must be prepared for these risks to occur together.
This interconnected threat environment is reflected in APRA's 2026-27 Corporate Plan, released in August, which focuses on ensuring the risk management practices of banks, insurers and superannuation trustees keep pace.
The number one strategic priority in our Plan is maintaining financial system stability.
One way we are achieving this is ensuring our regulated entities are strengthening their resilience to AI-enabled cyber threats.
Combatting these threats requires a "Team Australia" approach of information-sharing between business, government, regulators and national security agencies. APRA recently initiated a series of industry roundtables alongside ASIC and the Australian Signals Directorate involving more than 600 attendees from across the financial system.
Related to this issue, we will be assessing how entities identify, assess and manage risks associated with industry's concentrated reliance on common technology platforms and material service providers. Our concern here is that if large numbers of financial institutions are using the same major technology service providers, any disruption to that company would have an outsized impact on our financial system.
At a time when there remain major armed conflicts in eastern Europe and the Middle East, we continue to step up our focus on the management of geopolitical risk. In June, APRA wrote to regulated entities outlining our minimum prudential expectations for managing geopolitical risk. Over the next year, we will subject entities to more intensive supervision to ensure those expectations are met. We will be targeting uplifts in crisis preparedness and addressing risks such as insider threats and foreign interference.
Our focus on non-financial risks hasn't reduced the importance of traditional financial risk management.
Last month, we released a package of reforms to strengthen superannuation trustee investment governance and better protect members' retirement savings. The reforms are the next phase of APRA's multi-year focus on lifting investment governance standards across the superannuation industry, particularly within the platform trustee segment. The proposals are aligned with the measures announced by the Government in August to strengthen consumer protection and increase the resilience of the superannuation system.
In banking, we intend to undertake targeted thematic reviews of banks' lending practices to ensure they remain prudent, given the potential for less favourable economic conditions. We will also commence work on a new system-risk stress test to further strengthen APRA's understanding of risks from linkages between sectors and the overall impact for financial stability.
As always, our policy and supervision efforts are supported by a willingness to take strong enforcement action when required.
In August, APRA launched its first civil penalty proceedings under the Financial Accountability Regime.
APRA also imposed licence conditions on a large regional bank due to findings of longstanding and pervasive weaknesses in its non-financial risk management framework and the failure of previous remediation efforts.
Further, in September we imposed licence conditions on another significant mid-size bank and required it to hold additional capital and liquidity in response to material breaches of the bank's minimum liquidity requirements.
Our second strategic priority - getting the balance right - speaks to how APRA is trying to promote financial safety and stability in the most efficient way possible.
APRA's mandate has always required us to balance safety and stability with competition and efficiency considerations but in recent years we have given these considerations a heightened importance.
By the end of this year, we will have completed eight of our original nine "getting the balance right" commitments, on schedule. These initiatives are lowering costs, reducing complexity and supporting innovation.
Our latest Corporate Plan goes a step further. APRA's aim is to offset the impact of new policy requirements by simplifying existing requirements elsewhere.
Another key priority remains working closely with other regulators to reduce duplication and create efficiencies. For example, we are sharing more data with our peer regulators - up 30 per cent this year - reducing what would otherwise be duplicative requests on industry.
We have worked closely with ASIC to simplify the Financial Accountability Regime, with changes expected to reduce reporting for every institution covered by the regime and 4,500 accountable people.
Crucially, given the heightened risk environment, we are focused on reducing unnecessary complexity but not reducing resilience.
The third pillar of our Corporate Plan is improving our organisational effectiveness, so APRA's people are empowered to act quickly and decisively in an increasingly uncertain world. The risks we face are becoming more complex, interconnected and fast-moving. To remain an effective regulator, we need to strengthen our capabilities, modernise how we work - including through better use of AI - and improve our agility.
With that, I look forward to taking your questions.
Disclaimer: Curated by HT Syndication.
