Little additional cost in crisis measures says APRA

The Australian Prudential Regulation Authority (APRA) has told a key Parliamentary committee that it does not believe there will be any significant additional cost flowing from the implementation of legislation aimed at giving it more powers to deal with crisis situations.

The regulator has told the Senate Economics Legislation Committee that it believes the nature of the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017 means it will not add significant cost to the industry.

“APRA expects the majority of the reforms in the proposed legislation to have little or no compliance cost for industry in so far as they relate to powers that would only be exercised at the time of a crisis,” it said.

“While there may be some compliance costs in relation to resolution planning requirements during normal times, these would be proportionate to the size and complexity of an institution, and the development of a formal prudential standard on resolution planning will be the subject of APRA’s usual policy development and consultative processes,” the regulator said.

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The submission argued that resolution planning would involve APRA working closely with institutions to develop viable resolution plans on a case by case basis.

“Plans will not be ‘set and forget’ but rather are likely to involve an iterative process of improving resolvability over time,” it said. “The process for identifying and removing barriers to resolution would also be a collaborative one, with due account given to the relative costs and benefits of potential prepositioning measures that could be taken.”

The submission said APRA would also continue to work closely with other relevant agencies on resolution planning, including under the auspices of the Council of Financial Regulators.

“APRA strongly supports the proposed legislation, which is the culmination of several years of policy development and public consultation since the global financial crisis,” it said.