APRA flags 'digital first' focus in prudential framework modernisation plan

The Australian Prudential Regulation Authority (APRA) is working on a “digital first” initiative as part of its approach to make the design of the regulatory framework “clearer, simpler and more adaptable” for insurers, banks and super funds.

APRA says in an information paper released today that by “digital first” it means the regulator is exploring how to make use of suptech – short for supervisory technology – and regtech to support better regulation.

Other initiatives being pursued are better regulation and new risk, which the paper says refers to APRA’s approach to the regulation of “new risks, and new business models on the prudential perimeter”.

The paper says emerging risks such as crypto assets and digital ledger technology require “new thinking” around APRA’s role, the right balance in setting expectations, and the existing framework.

“Rather than simply add to the standards to cater to these new risks and new business models, APRA intends to develop a more integrated approach,” the paper says.

This would mean “considering how to enhance existing requirements where possible, as opposed to bolting on new standards”.

“APRA also plans to adopt a disciplined approach to guidance and advice, providing clarity on expectations while maintaining cohesion in the framework,” the paper says.

The information paper outlines APRA’s approach to modernising the prudential architecture, setting out the objectives, scope and next steps in the program, and provides an overview of what to expect over the next few years.

“For the prudential framework, there is scope to make it clearer, simpler and more adaptable,” the paper says.

“There is also scope to reduce undue cost and complexity for industry, and support innovation. Over and above this, there is a need to ensure the framework can adapt to the challenges on the horizon, and continue to underpin financial safety in an ever-changing environment.”

APRA says over the next 6-12 months, it plans to engage with regulated entities, industry associations and other key stakeholders through targeted workshops and a broad survey, to understand any “pain points” with the current framework and identify opportunities for improvement.

“In 2023, APRA intends to publish more detailed plans for changes to the framework that will be implemented over the period ahead,” the paper says.

Click here for the information paper.