APRA Corporate Plan 2023-24

The Australian banking industry remains safe and resilient with “unquestionably strong” regulatory capital ratios continuing to promote financial stability. There are, however, challenges facing the industry, including a prolonged period of higher inflation and interest rates, heightened geopolitical risks, cost-of-living pressures affecting bank customers, and the emergence of new digital competitors to respond to customer expectations. Further, recent market disruption seen in the international banking sector has provided insights for rethinking supervisory approaches. These challenges require ongoing supervisory focus to ensure that safety and resilience is maintained, along with an evolution in our approach to supervision to address new risks and business models. Over the plan horizon, APRA will:

• Address lessons learned from recent market disruption through: 
  • Risk-based reviews of financial risk and targeted changes to liquidity and interest rate in the banking book prudential requirements to ensure these risks are being managed appropriately; 
  • Incorporate relevant learnings from the Basel Committee’s review of recent banking stress, including consideration of options to improve the effectiveness of Additional Tier 1 capital instruments in Australia¹;  and
• Engage with the Government, Treasury, and other CFR agencies on reforms to modernise the payments regulatory framework.

In the 2023-24 Corporate Plan, APRA has identified key challenges that inform our strategic priorities over the plan horizon. These key challenges have been informed by: 

• An assessment of risks and opportunities arising from the operating environment;
• Developments in the focus of international standard setting bodies;
• Insights from external reviews;
• Expectations of Government as expressed in the Statement of Expectations (2023); and
• Ongoing engagement with regulated entities, peer agencies and members of the community. 

APRA is also mindful of the risks posed by non-regulated entities to the safety and resilience of the financial system and works with the Council of Financial Regulators (CFR) agencies to determine and coordinate appropriate regulatory responses to these risks.  

Core focus areas

APRA’s delivery of the key outcomes and strategic priorities outlined in this plan are supported by its core focus areas:

• Policy development, that involves APRA’s development and maintenance of a comprehensive framework of prudential standards and practice guides. APRA’s standards set out enforceable requirements, while the prudential practice guides provide guidance on how entities may adhere to and implement these prudential standards. 
• Risk-based supervision, which uses APRA’s supervision framework, review and approval processes, SRI model, and data collected from regulated entities to provide oversight of regulated entities, industries and the financial system. Where needed, APRA will increase supervision intensity to address identified issues.
• Enforcement, where APRA adopts a “constructively tough” and transparent approach to the use of formal enforcement tools when a regulated entity does not comply with prudential standards and expectations. These tools include applying additional capital requirements, directing entities to take or cease actions, imposing licence conditions and court-based enforceable undertakings.
• Resolution, where APRA implements a prompt and effective response to the likely failure of a regulated entity to achieve an orderly exit and minimise disruption and losses to beneficiaries.

APRA is strengthening key enablers to drive the execution of its 2023-24 Corporate Plan and ensure the organisation is evolving to address new challenges.

Modernising the Prudential Architecture

APRA’s goal is that Modernising the Prudential Architecture (MPA) will deliver a clearer, simpler, and more adaptable digital prudential framework that will reduce costs, be easier for industry to understand, and be more efficient to supervise and maintain.

Against a backdrop of accelerating digitisation and innovation within the financial sector, the MPA program is focused on these key areas:

• Better regulation to simplify the design of the regulatory framework to make it more cohesive, proportional to the size and complexity of regulated entities, and better aligned to the needs of the users;
• Development of a digital framework to bring together all APRA’s prudential standards, guidance and supporting information into a dynamic format that can be searched and navigated easily; and
• Regulate new risks in a way that does not add complexity to the current framework and enhances existing standards where possible.

Consistent with the intent of the MPA program, APRA will continue to challenge itself rigorously about whether new requirements or guidance are necessary to protect the financial interests of Australians before making changes to the prudential framework and ensure that competition and efficiency considerations remain central to this process.

Transforming our technology and use of data

APRA is committed to being a data-driven prudential regulator to support sharper risk-based supervision and provide greater transparency to stakeholders about the safety and resilience of regulated entities.

As foreshadowed in the December 2022 Data Directions Response paper, APRA has embarked on the first annual review of its data collections roadmap. This review will reconsider the pace, sequencing and priorities of the roadmap, while also seeking to ensure APRA’s data and technology capabilities are aligned with our strategic priorities. 

Over 2023-24, APRA will:

• Stabilise data and technology infrastructure, to ensure there are strong foundations to proceed with the ambitious data change program that has been outlined in the Direction for Data Collections Discussion and Response papers;
• Leverage the benefits associated with the creation of a dedicated Technology and Data Division to strengthen data governance and project delivery; and 
• Engage with stakeholders to ensure that regulatory costs associated with data collections are minimised.

APRA will also continue its role in collecting and sharing financial sector data with the Government and other agencies and is working closely with the Treasury, RBA, the Australian Bureau of Statistics and ASIC, to plan and design data collections to inform public policy.

Cultivating an agile and engaged organisation

APRA has highly capable and engaged staff that are committed to delivering our purpose and serving the community. To build on our track record of success in responding to new challenges, APRA is clarifying internal roles and responsibilities to support transparent and accountable decision-making and prioritising initiatives to empower staff to “prepare for tomorrow”. Attributes of this work will include sustained focus on prioritisation to respond quickly to new and emerging issues, with leaders being empowered to make risk-based decisions. 

Underlying this focus on evolving the organisation to respond to new challenges will be a one APRA mindset to deliver our purpose. This will be supported by APRA-wide actions that are outlined in this plan, as well as innovations being driven by senior leaders to develop and shape better ways of working.

APRA has taken the following factors associated with the operating environment into consideration when setting its 2023–24 Corporate Plan.

APRA’s performance against its 2023–24 Corporate Plan including analysis of the factors contributing to results against performance measures and targets outlined below including the most recent stakeholder survey results where indicated, will be reported in the Annual Performance Statement included in APRA’s 2023-24 Annual Report. 

Performance measures aligned to the principles of regulator best practice¹⁵

Footnotes

[1] APRA’s 10 August 2023 letter to industry provided an interim update on policy priorities.

[2] Networks include: gender; generations; Culturally and Linguistically Diverse; Aboriginal and Torres Strait Islander; and lesbian, gay, bisexual, trans and gender diverse, intersex and queer (Pride).

[3] Scope 1 covers emissions from sources that an organisation owns or controls directly. Scope 2 are emissions that an organisation causes indirectly and come from where the energy it purchases and uses is produced (e.g., using electricity in offices). Scope 3 encompasses emissions that are not produced by the organisation itself nor the result of activities from assets owned or controlled by them, but by those that it is indirectly responsible for up and down its value chain (e.g., buy and use products from suppliers).

[4] Portfolio Budget Statements (treasury.gov.au)

[5] APRA's stakeholder survey

[6] Targets apply to the four reporting periods covered by APRA’s 2023–24 Corporate Plan including 2023-24; 2024-25; 2025-26; and 2026-27.

[7] Five performance measures have been removed since APRA’s 2022-23 Corporate Plan was published. All of which related to questions from APRA’s biennial stakeholder survey.

[8] Prudential and Reporting Standards for APRA Regulated Industries

[9] APRA measures the sustainability of a superannuation fund based on a number of factors including its operating expenses, size, growth rate, and returns relative to benchmarks.
    
[10] Information on APRA’s SRI model
    
[11] Methodology for the superannuation performance test contained in the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). View the 2022 MySuper performance test results.
    
[12] Methodology for the superannuation performance test is contained in the SIS Regulations.

[13] Recommendations from independent reviews relate to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry; APRA’s Capability Review; and the Financial Sector Assessment Program undertaken by the International Monetary Fund in 2018-19; and the FRAA review of APRA completed in July 2023.
    
[14] APRA Service Charter

[15] The three principles of regulator best practice are: 1) continuous improvement and building trust; 2) risk based and data driven; and 3) collaboration and engagement. These are referred to as ‘regulator measures’ by APRA. Further information is available on the finance.gov.au website.

Disclaimer and Copyright

While APRA endeavours to ensure the quality of this publication, it does not accept any responsibility for the accuracy, completeness or currency of the material included in this publication and will not be liable for any loss or damage arising out of any use of, or reliance on, this publication.

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