APRA finalises amendments to guidance on recovery and resolution planning

APRA finalises amendments to guidance on recovery and resolution planning | Insurance Business Australia

Insurance News

New prudential standards aim to ensure entities have plans to respond to severe financial stress

Insurance News

By
Roxanne Libatique

The Australian Prudential Regulation Authority (APRA) has finalised the amendments to its guidance on strengthening the preparedness of insurers, banks, and superannuation funds when responding to crises.

In December 2021, APRA started seeking industry feedback on two new prudential standards designed to improve the recovery and resolution planning among APRA-regulated entities:

Prudential Standard CPS 190 Recovery and Exit Planning (CPS 190), finalised in December 2022, aims to ensure that all APRA-regulated entities have recovery and exit plans to respond to severe financial stress; and
Prudential Standard CPS 900 Resolution Planning (CPS 900) and its accompanying Prudential Practice Guide CPG 900 Resolution Planning.

Aims of guidance on strengthening recovery and resolution planning

CPS 190 aims to ensure that all APRA-regulated entities have recovery and exit plans to respond to severe financial stress. Meanwhile, under CPS 900, large or complex APRA-regulated entities must support APRA in bespoke planning and pre-positioning to ensure that failures can be resolved in an orderly manner.

“The Australian financial system is one of the strongest and most resilient in the world, but as we’ve just seen internationally, sometimes crises occur and we need to be prepared,” Lonsdale said.

“In the unlikely event a bank, insurer, or superannuation fund got into difficulty, it would need to ensure it could recover or exit from the market in an orderly manner. Where an entity is unable to do this, APRA would take steps to resolve the entity safely in a manner that protects its depositors, policyholders, or members.”

APRA expects the new requirements and guidance for recovery planning to underpin existing expectations for insurers and banks, which have experience in the area. Meanwhile, superannuation trustees are expected to continue investing in crisis preparedness ahead of their formal requirement to comply with CPS 190 at the beginning of 2025.