A year ago, APRA introduced a new strategic objective: “Getting the balance right”. The regulator says it has simplified requirements, reduced duplication and improved proportionality – without compromising on safety and stability.
What the Objective Is Not Meant to Do
In its statement, APRA writes: “When APRA talks about reducing unnecessary regulatory burden, we do not mean lowering standards.” The same text says the objective is not about reducing standards and also is not about choosing between safety and efficiency.
APRA states that it does not pursue a “safety at all costs” agenda. The statement summarises the aim this way: APRA is seeking to deliver safety and stability in the most efficient way possible.
Scale of the System and the Cost of a Crisis
APRA points to the size of the sector: with APRA-regulated entities managing more than $10 trillion in assets, the economic benefits of that stability are significant.
The statement also draws on research. International research suggests that the average net present value cost of a financial crisis, even if well managed, is around 43 per cent of GDP.
Initiatives Moving Toward Completion
Eight of the nine initiatives announced in last year’s Corporate Plan are expected to be finalised by the end of 2026 and will deliver targeted reductions in burden for industry, according to the regulator’s account.
What the Statement Says About Insurers and Banks
Insurers have gained greater access to more cost-effective forms of reinsurance, while changes to annuity capital requirements are expected to lower costs and support growth in retirement income products, the statement says.
For readers who follow the reinsurance topic, InsuraBeat has separate coverage of an APRA reinsurance framework overhaul and complex covers. For readers who follow annuity capital, InsuraBeat has separate coverage of the APRA longevity capital rules for annuities.
For banks, the statement says Banks will benefit from a new tier in APRA’s proportionality framework and a simpler licensing regime.
Proportionality and Shared Data
APRA says its policy framework applies simpler or fewer requirements to smaller entities, while placing greater scrutiny on the largest and most complex institutions.
The statement describes the next evolution of APRA’s bank proportionality framework: a third tier. The third tier is described as providing greater flexibility to tailor requirements to an institution’s size and complexity. For readers who follow insurer guidelines, InsuraBeat has separate coverage of APRA recognition guidelines that cover insurers explicitly.
In the past 12 months, APRA says it has shared 30 per cent more data with external stakeholders, reducing what would otherwise be duplicative requests of industry, as the statement notes.
