APRA executive talks about ensuring the banking sector’s adaptability while trying to ease regulatory burden
Therese McCarthy Hockey (pictured above), an executive board member of the Australian Prudential Regulation Authority (APRA), has emphasised the regulator’s commitment to proportionality in its supervisory and policymaking roles.
“As a risk-based financial safety regulator, proportionality is central to everything we do at APRA,” Hockey said in a speech delivered at the Customer Owned Banking Association (COBA) CEO and Director Forum in Sydney last week.
“In supervision, it means we devote more time and resources to monitoring entities that pose a greater risk – either because of their systemic significance or because we have concerns about their prudential soundness.
“In the policy sphere, we need to strike a balance: ensuring there is at least a base level of financial and operational soundness across the industry, while incorporating other considerations such as efficiency and competition.”
Hockey highlighted the rapidly evolving global financial system and the increasing array of risks banks must manage, notably citing the rapid spread of a banking crisis in the United States last year, facilitated by social media and online banking. She pointed out the ongoing threat of cyber breaches and the growing reliance on digital technologies, referencing a recent incident in which a major bank’s online app failure left customers unable to access funds.
Addressing the adaptation to new threats, Hockey mentioned APRA’s efforts in strengthening banks’ liquidity requirements and interest rate risk management, alongside introducing a new standard on operational risk management.
“From our conversations with COBA and its members, we know that banks understand the importance of ensuring these risks are properly managed and your customers adequately protected,” she said. “But we also recognise that keeping pace with the introduction of new or updated regulatory requirements presents financial and resourcing challenges for the mutual sector that make it harder to compete with its larger rivals.”
Hockey then outlined APRA’s initiatives to ease the regulatory burden on banks, such as the transition to the Financial Accountability Regime, building on the Banking Executive Accountability Regime. She detailed efforts to reduce unnecessary reporting burdens and to provide banks with additional time for compliance.
She also mentioned the Modernising the Prudential Architecture initiative, aiming to simplify the regulatory framework and enhance digital accessibility. An upcoming digitised Prudential Handbook was highlighted as a key part of this effort, designed to make navigation and compliance easier for institutions.
Hockey also touched on a commitment to enhancing transparency and reducing data burdens, especially for smaller entities. She welcomed the government’s announcement of a new financial sector regulatory grid – an initiative APRA views as crucial for coordinating regulatory efforts more effectively.
She then encouraged mutual banks to remain vigilant and adaptable to ensure their long-term sustainability in the face of new challenges, including technological innovation and shifting consumer preferences.
“We will continue to evolve our approach and prudential framework in response to new risks and changes in the operating environment, which is exactly what the community expects from us,” Hockey said.
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