APRA signals higher capital requirements for recalcitrant institutions
A number of institutions, including superannuation funds, are facing having additional operational risk capital requirements imposed upon them by the Australian Prudential Regulation Authority (APRA).
The Regulator has threatened imposing the additional requirements on the basis of regarding issues identified by the institutions themselves as “significant”.
APRA’s approach follows 37 financial institutions having been requested to self-assess their governance, accountability and culture in the context of the final report of the Prudential Inquiry into the Commonwealth Bank of Australia.
Importantly, the self-assessment involved 11 superannuation funds, 10 banks and credit unions, nine general insurers, four life/risk insurers and three private health insurers, with ARPA expressing concern that significant issues continued to exist with many having not been addressed by the companies for years.
It signalled that this was prompting it to impose the more stringent capital requirements.
“For some institutions, the issues identified in the self-assessment are significant, and the changes required to address them are material, presenting a heightened operational risk,” the APRA report said. “To reflect this, APRA is considering the need for the application of an additional operational risk capital requirement until issues are fully addressed.”
It said that linking this capital overlay to action plans would provide an additional incentive for institutions “to pursue timely and effective rectification, where this has previously proved challenging”.
“APRA will also consider the extent to which further targeted thematic reviews may be required to continue to drive improvements in governance, accountability and culture across the financial services sector,” it said.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
