The regulator released its policy and supervision priorities for 2021 on Monday, with a focus on the resilience and crisis readiness of the financial system.
APRA suspended much of its planned policy and supervision agenda in March last year, prioritising its responses to the impacts of COVID-19.
But the agenda was recommenced in late 2020, with the regulator now looking to ensure the sector stays steady, competitive, innovative, and able to support the recovery from the pandemic downfall.
APRA has pledged its supervisory focus on maintaining financial system resilience with increased action on crisis readiness, including stress testing, and recovery and resolution planning.
Prudential standards on operational risk, governance and risk management are set to be updated, while the industry can also expect to be asked for feedback on the financial risks tied to climate change.
The climate risk governance is expected to be released for consultation in the first half of the year, to be finalised before the end of 2021.
Alongside supporting the roll-out of the Your Future, Your Super reforms for the superannuation sector, the regulator is also looking to address MySuper underperformance, with the heatmaps to expand to include Choice products.
Super funds have been warned, APRA will take enforcement action against laggards when it deems it necessary.
Executive pay and corporate culture, risk and accountability are also up for scrutiny, as the regulator implements its new remuneration standard. The pay standard, which aims to ensure consequences for poor risk management, is an outstanding royal commission recommendation.
Following consultation, APRA intends to finalise and release the standard mid-year, ahead of a phased implementation from 2023. APRA chair Wayne Byres said while the industry demonstrated its resilience in 2020 on the back of substantial government support, it was important to keep readying financial services for any other challenges.
“The robust response to date is not a cause for complacency, but underlines the value of an ongoing regulatory program that seeks to identify risks and put in place appropriate mitigation strategies to protect the interests of depositors, policy holders and fund members,” Mr Byres said.
But given the ongoing volatility caused by COVID, APRA has pledged to keep its agenda flexible, ready to respond when needed.
APRA and ASIC’s work on the Financial Accountability Regime (FAR) with Treasury is also set to continue this year. It was delayed due to COVID after being introduced into Parliament – but APRA has now stated the legislation is likely to be consulted on in 2021.
Further, APRA will be increasing its scrutiny of companies’ cyber security.
