Key concerns include cost-of-living pressures and an increase in cyber-attacks
While reiterating the current strength and stability of Australia’s financial system, the Australian Prudential Regulation Authority (APRA) said it is monitoring multiple factors to ensure the sector remains robust and resilient.
In his address to the Senate Economics Legislation Committee, APRA chair John Lonsdale (pictured above) highlighted the importance of a strong financial framework for the economy and outlined the challenges and priorities facing the sector.
Among the key concerns cited by Lonsdale were the cost-of-living pressures that impact real household disposable incomes and spending patterns.
“We are seeing credit continuing to flow both for commercial and residential lending,” Lonsdale said. “Although the level of non-performing loans is creeping up, it remains significantly lower than prior to the pandemic, and we remain satisfied with the overall quality of bank lending.”
According to Lonsdale, the summer’s severe storms also brought to the fore the critical role of insurance in providing support during crises, alongside the need to tackle issues of affordability and accessibility of insurance through collaborative efforts.
The rise in cyber-attacks and geopolitical volatility were also noted as significant risks to the financial sector, with APRA responding by focusing on operational and cyber resilience, making prudential framework adjustments, improving superannuation trustees’ practices, and making efforts to balance financial sustainability with insurance affordability and availability.
“In undertaking this work, APRA will continue to leverage its whole-of-system perspective and work collaboratively with the Council of Financial Regulators,” Lonsdale said.
APRA has set forth its Policy and Supervision Priorities, offering a six-month outlook on key focus areas for banking, insurance, and superannuation. These priorities include enhancing operational and cyber resilience, implementing lessons from recent global banking instabilities, and improving practices around retirement incomes and insurance sustainability.
Additionally, APRA has launched the second phase of its Superannuation Data Transformation to increase transparency and address underperformance in the superannuation sector. The authority confirmed the maintenance of the mortgage serviceability buffer at three percentage points and the countercyclical capital buffer at 1%, aiming to bolster bank resilience and maintain high lending standards.
Recent enforcement actions by APRA highlighted issues related to risk governance and cyber controls.
APRA’s efforts, Lonsdale said, are supported by a highly engaged workforce, with an 80% favourable score in its latest annual engagement survey.
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