However, financial services firms face risks
Australia has continued its period of financial system resilience because of regulatory settings that were strengthened and enhanced, according to Australian Prudential Regulation Authority (APRA) chair John Lonsdale (pictured).
During his opening statement to the House of Representatives Standing Committee on Economics, in which he discussed APRA’s annual report from 2022 to 2023, Lonsdale said that despite the resiliency, some financial services firms were encountering significant risks that are in need of vigilance and preparation.
“The international banking issues associated with Silicon Valley Bank and Credit Suisse in 2023 had no contagion impact in Australia. Yet the events offered lessons for how to strengthen APRA’s tools, the resilience of banks and their response to stress events,” said Lonsdale.
“APRA has since adjusted regulatory settings by improving and simplifying the framework for managing interest rate risk (IRRBB requirements), making targeted adjustments to liquidity settings, and is in consultation with industry on removing Additional Tier 1 (AT1) capital instruments,” he added.
Lonsdale also said that the regulator will maintain the current macroeconomic settings like the mortgage serviceability buffer and the counter-cyclical capital buffer. With the macroprudential policy reducing the risks in financial stability at the system-wide level, APRA said it will continue to monitor the vulnerabilities and risks in the system as well as look into the settings of the policy.
Meanwhile, APRA has also released a package of performance metrics and insights as part of its efforts to improve the transparency in superannuation.
“We are currently examining trustee expenditure data at a fund level to ensure that RSE Licensees decisions are in members’ best financial interests,” said Lonsdale.
He also said that the regulator is looking for ways for superannuation trustees to support members that are nearing their retirements. It also works alongside industry, regulators, and the government in order to address insurance affordability and availability pressures.
“APRA regularly reviews its own capabilities so it might continue to evolve as a modern and future-ready regulator,” said Lonsdale.
