FRAA makes five recommendations for APRA

The Financial Regulator Assessment Authority (FRAA) has released its review of the Australian Prudential Regulation Authority (APRA).

The review recognised APRA’s key role in maintaining financial safety and system stability for the benefit of the community and its important contribution to Australia’s world-leading financial system. 

It also found APRA’s supervision of superannuation is “effective and capable” but its resolution function is less developed, which matched with APRA’s self-assessment.

The five FRAA recommendations which aim to strengthen risk identification in the superannuation industry, continued development of capabilities and expertise of APRA’s people, investment in data and technology, enhancing transparency to maximise the impact of APRA’s outcomes, and lifting recovery planning and resolution readiness. 

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The recommendations are:

• APRA should increase its efforts to identify risks in superannuation, including emerging and systemic risks, and their potential consequences. APRA could then better perform its supervisory activities and recovery and resolution planning;
• APRA should prioritise and invest in initiatives to recruit, train, retain and develop its staff to build appropriate skills and industry knowledge, to drive deeper understanding and build stronger capability to manage and respond to emerging and systemic risks
• APRA should continue to invest in its data and technology capabilities and processes to provide timely insights, allow effective internal collaboration, and to the extent appropriate, minimise regulatory burden associated with data and information requests;
• APRA should provide trustees with annual plans of proposed supervisory activity. APRA should keep trustees informed of the status of reviews, information requests and other supervisory activities. In relation to thematic reviews, APRA should consider publishing its methodologies and more detailed insights to build public awareness and enable interested parties to comment. APRA should consider communicating more timely and detailed insights across industry to increase awareness of risks and promote better practices;
• APRA should prioritise developing its resolution capability and work closely with industry to lift awareness of recovery and resolution planning requirements, to ensure APRA is able to support recovery and exit, and resolve failing superannuation trustees. Doing so will also serve to enhance its supervisory function.

APRA chair, John Lonsdale, said: “APRA welcomes the FRAA’s review of APRA’s superannuation capabilities. The recommendations provide helpful guidance and reinforcement for a more effective APRA into the future. 

“APRA will continue to build on its strong foundation of safeguarding the financial wellbeing of the Australian community by further strengthening prudential frameworks and improving capability to drive better industry practices in superannuation for the benefit of members."