APRA has announced that its near-term policy agenda will be shaped by its response to the Hayne royal commission while also taking into account BEAR and other legislation.
APRA chair Wayne Byres said much of the focus would be on strengthening the prudential framework to lift the bar for the industry.
“Financial soundness and stability remain at the core of APRA’s objectives. But APRA’s Prudential Inquiry into Commonwealth Bank of Australia (CBA) highlighted the importance of not just having a healthy balance sheet, but also strong governance, a sound culture, appropriate internal controls, and clear accountabilities,” he said.
Mr Byres also said these issues were emphasised during the royal commission and would be addressed by the authority.
“To address these issues, we will further strengthen our prudential requirements on executive remuneration, with consultation on a revised prudential standard due to start mid-year.
“We will also review our cross-industry governance and risk management standards this year to ensure they encourage a sharper focus on non-financial risks.
For ADIs, APRA has said it would progressively make changes to the capital framework to embed the Basel III reforms and to ensure ADIs remain on track to meet capital ratio benchmarks.
It will also update the prudential standard on credit risk management as recommended in Commissioner Hayne’s final report.
APRA will also focus on the super industry with plans to ensure trustees are prepared to implement the new member outcomes assessment and will complete the post-implementation review of the prudential framework.
APRA will also review its approach to enforcement in light of the BEAR and CBA inquiry as well as the recommendation of the royal commission for it to develop a stronger appetite for formal enforcement action.
The final review will be presented to APRA members at the end of March. APRA will publish a new enforcement strategy shortly afterwards.
