Prudential regulation is designed to ensure that entities, such as banks, insurance companies and superannuation fund trustees, which make financial promises to consumers are capable of meeting those promises.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator for banks in Australia. As part of its work, it implements international prudential standards issues by the Basel Supervision Committee (Basel) and the Financial Services Board (FSB) in the Australian regulatory context.
Since the GFC, APRA has spent much of the past decade working to improve banking system resilience, primarily by lifting bank financial strength and improving lending standards to address emerging systemic risks. As a result, the risk-based capital ratios of the Australian banking system are higher than they have ever been, the funding profile is more stable, liquidity levels are improved, and lending standards, particularly in relation to mortgages, have been materially strengthened.
The 2019 IMF Financial Sector Assessment Program (FSAP) report on Australia found that the Australian financial system has been further strengthened since the IMF’s previous assessment in 2012. The FSAP underscored the strength and resilience of the Australian financial system.
The ABA works with regulators to represent our members interests on these prudential matters. Australian banks want to ensure that its industry reputation remains unquestionably strong by ensuring prudential regulation addresses risks in the most efficient way.