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Corporate plan updated

APRA has updated the corporate plan for 2022–23 to fortify the financial stability of the insurance, superannuation and banking industries over the next four years.

Background- corporate plane updated

The updated plan focuses on the twin themes of “protecting the community today” and certifying the financial system is “prepared for tomorrow” to counter rapid changes, including inflationary pressures, geopolitical tensions, rising interest rates, and the influence of new technologies.

APRA plans to protect Australians by:

  • preserving the financial and operational resilience of banks, insurers, and superannuation funds
  • building on the momentum to modernise the prudential architecture, and
  • better enabling data-driven decision-making by APRA’s stakeholders.
  • It will ensure the financial system is composed and ready for the challenges of tomorrow by:
  • Increasing its emphasis on the evolving financial landscape, including responding to the repercussions of new financial participants and activities
  • helping to find solutions to challenges concerning insurance accessibility and affordability for Australians, retirement income longevity solutions, superannuation retirement income products, the financial risks associated with climate change, and
  • adopting the most recent regulatory tools, techniques, and practices.

The plan also outlines APRA’s goal of enhancing its performance by fostering a modern and flexible working environment.

Insurance perspective – corporate plan

APRA said its key insurance highlights are strengthening governance, risk management and business strategy practices.

The highlights include addressing deficiencies identified in self-assessments undertaken by general insurers and embedding new capital requirements for private health insurers.

It will focus on promoting the sustainability of insurance products for the long-term benefit of consumers, including heightened attention to specific business lines where needed.

Additionally, it will align the prudential framework with Australian Accounting Standard AASB17 Insurance Contracts, including implementing renewed data collections.

It concluded that it would improve resilience and reduce the impact and risk of an unsystematic exit of an insurer by ensuring effectual continuity, recovery and resolution plans are in place.

Super perspective – corporate plan

APRA highlighted improving superannuation performance by rectifying sub-standard practices through robust supervision, strengthening prudential standards, and reinforcing minimum expectations.

Particularly regarding fund expenditure, including trustees’ practices relating to their ‘best financial interests duty’ (BFID) obligations, successor fund transfers and financial resilience, investment governance, strategic planning and business performance review actions, practices and insights.

To further reinforce the super industry, it will maintain momentum on eliminating unacceptable product performance by escalating pressure on trustees to cease offering high-fee, poor-performing products and scrutinising Choice products.

It aims to do this via the Your Future, Your Super performance test and continuing to publish its MySuper and Choice heatmaps to encourage improved transparency, decision-making, and accountability.

It also aims to strengthen the supervision of trustees of products that fail the performance test or otherwise demonstrate poor performance and use its prudential powers to take action against trustees where warranted.

It added that it would accelerate beneficial industry consolidation to establish viable and durable business models across the superannuation sector.

The corporate plan commented that APRA has focused on trustees improving outcomes for members, including eradicating unacceptable performance and reducing fees and costs.

Financial perspective – corporate plan

It concluded that it would look to lessen the impact and risk of an unconventional exit of an insurer by establishing that effective continuity, recovery and resolution plans are in place and subsequently improve resilience.

Measures to strengthen banking will ensure ongoing resilience by delivering core supervisory activities, with heightened vigilance on flow-through effects from Covid, rising inflation, increasing interest rates, and geopolitical tensions.

Embed key avaricious reforms, including “unquestionably strong” capital ratios, Prudential Standard CPS 511 Remuneration, and Basel III requirements.

Implement good governance, risk culture, remuneration and accountability (GCRA) practices across the banking industry and share exploratory learnings from the climate vulnerability assessment.

It will also upgrade banks’ business continuity and contingency practices, focusing on recovery planning, operational resilience, and critical function resolvability.

APRA chair Wayne Byres expressed that, despite the economic challenges of the past two years, Australia’s financial system remains stable and resilient.

However, he also indicated that we could not afford to be complacent. Global economic conditions will likely deteriorate over the coming period, exacerbated by the ongoing war in Ukraine. In addition, the increased cost of living and recent flooding reminds us that Australia is facing turbulence.

As Australia’s avaricious supervisor, APRA wants banks, insurers, and superannuation trustees to retain their financial and operational strength. That best situates them to support their customers through periods of disruption and volatility.

“Our latest Corporate Plan will help us achieve these objectives by focusing on delivering our existing strategic priorities whilst keeping a watchful eye on changes in our operating environment and responding as needed,” Mr Byres said.

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