APRA to recommence prudential policy program and issuing of new licences

By Edil Corneille

The Australian Prudential Regulation Authority (APRA), which is the country’s prudential regulator of banks, insurance companies, and most superannuation funds, announced that it will recommence public consultations on select policy reforms and begin a phased resumption of the issuing of new licenses.

APRA’s recommencement of assessing and issuing new banking, insurance, and superannuation licences will occur in two phases, with phase one starting in September 2020 and phase two in March 2021.

New licences issued during phase one will be issued to applicants that are branches or subsidiaries of foreign entities with significant financial resources and a strong operational track record in a similar business. APRA will also accept new licence applications from any entity from September 2020.

From March 2021, APRA envisages new licences may be issued to any entity that meets the relevant prudential requirements. APRA is also reviewing the pathways to an ADI licence, including the Restricted ADI licensing framework that was launched in 2018, to incorporate experiences to date, while continuing to support competition in the sector.

APRA Chair Wayne Byres apprised, “In January this year, APRA published an ambitious policy agenda. The onset of COVID-19 necessitated the suspension of many of APRA’s policy and supervision priorities until end-September. This enabled regulated entities to allocate time and resources to manage their own operational challenges in response to the crisis, as well as supporting their customers through this period of significant economic uncertainty. It also allowed APRA to redeploy its resources to monitoring and responding to the impact of the rapidly changing environment.

“In the case of licensing, we considered it appropriate to suspend the issuance of licenses in light of the high level of uncertainty created by COVID-19, which would have created especially acute challenges for new entrants.

“We now believe we can restart both policy consultations and licensing activity.

“However, it is neither possible nor desirable to pursue our full policy agenda for the time being. APRA therefore intends to narrow its policy activities in the remainder of this year to a small number of high-priority prudential policy reforms,” Byres said.

The policy reforms that will be recommenced in 2020 through a process of public consultation are the cross-industry prudential standard for remuneration; ADI capital reforms incorporating APRA’s unquestionably strong framework, Basel III and measures to improve transparency, comparability, and flexibility; insurance capital reforms to incorporate changes in the accounting framework (AASB 17); and the prudential standard for insurance in superannuation, and updated guidance on the sole purpose test.

Aligned with its policy agenda, APRA will also restart consultation on a limited number of its data collections, including the recommencement of its Superannuation Data Transformation project.