Australia: APRA Provides Insight into 2023 Priorities

By Jim Bulling, Anabelle Weinberg and Lok Choy

The Australian Prudential Regulation Authority (APRA) has released its policy and supervision priorities for 2023 with the aim to increase the financial soundness of the banking, insurance and superannuation industry.

APRA Chair, John Lonsdale, has announced that “2023 will bring a lighter APRA policy load” and will instead have a “focus on embedding prior major reforms”. APRA’s key policy priorities for 2023 include:

• completing key reforms to strengthen the financial and operational resilience of APRA-regulated entities, and improve outcomes for superannuation members;
• progressing APRA’s plan to modernise the prudential architecture, a core strategic initiative designed to make the framework clearer, simpler and more adaptable; and
• reviewing core standards, including governance and the regulation of conglomerate groups.

Following the prominence of cyber breaches in 2022, APRA has warned that it plans to exercise heightened supervision of Prudential Standard CPS 234 Information Security in order to improve cyber resilience ahead of the expected release of Prudential Standard CPS 230 Operational Risk Management on 1 January 2024.

APRA has also signaled that it will formalise the collection of non-financial risk data in areas such as remuneration, financial accountability and climate change and will release detailed plans for the design and implementation of this collection process for each industry to expose and eradicate underperforming products or actions.

Monitoring superannuation trustee progress will also be a key focus of APRA’s entity supervision in 2023 and all trustees are expected to have undertaken self-assessments to rectify and improve superannuation member outcomes.

In light of these goals, superannuation trustees are urged to plan in advance for:

• growing inflation and interest rates which may create liquidity stress;
• the release of APRA’s Choice Heatmap which it uses to assess drivers of poor product performance;
• new retirement income covenants which demand that trustees change their offerings to better serve members as they reach retirement.