The major threats to Australia's "broadly healthy" financial system are commercial and residential property, bank capital levels, rising insurance claims and superannuation governance, according to APRA.
APRA's Corporate Plan 2016-2020 lays out the prudential regulator's strategic initiatives over the next four years, as well as the "areas of vulnerability" that must be addressed.
In developing its corporate plan, APRA explained it must assess a range of factors including the outlook for the Australian financial system, trends in technology, community expectations, and APRA's ability to maintain the quality of its workforce and build new capabilities.
"The corporate plan is founded on an environment in which the outlook for global growth remains subject to significant uncertainty," said APRA.
Global events and rising geopolitical tensions have led to rising bouts of volatility in equity, bond and foreign exchange markets in recent years, said the regulator.
In addition, Australian economic growth is likely to be "below trend" throughout the next 12 months, said APRA.
"Although the general picture is one of a broadly healthy Australian financial system, there remain some areas of vulnerability," said APRA.
"These include risks in the residential and commercial property markets, the funding profile of the banking system, poor experience in some segments of the insurance market, and the need to further strengthen governance and transparency in the superannuation industry."
APRA's four strategic initiatives include: sharpening risk-based management; building recovery and resolution capability; honing governance and workplace effectiveness; and enhancing leadership, culture and opportunities for APRA staff.
"The corporate plan is an integral part of APRA’s performance framework and establishes its plans to continue to build and strengthen its core functions and capabilities through its strategic initiatives, thereby positioning APRA to effectively respond to changes in its operating environment," said the regulator.