TABLE OF CONTENTS

    Summary

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    The Australian Prudential Regulation Authority (APRA) has undergone several initiatives over the last few years to make its standards and guidance simpler, clearer, and more adaptable.

    In a culmination of these efforts, APRA has now launched its digital framework, taking shape as its digital “Prudential Handbook”.


    The Aim of the Prudential Handbook

    APRA-digital-prudential-handbook-03The Handbook consolidates APRA’s policy standards, guidance, and supporting information into one place. Through the release of this new resource, APRA aims to make information easy to find and navigate for users across regulated industries and in the broader community.

    APRA Chair John Lonsdale explains, “The ultimate goal we have been working towards is a digital framework that will be easier for the industry to understand and comply with, and for APRA to supervise and maintain – and ultimately to better protect Australians’ financial interests.”

    APRA-regulated entities that will benefit from the Handbook include:

    • Banking
    • General Insurance
    • Life Insurance
    • Private Health Insurance
    • Superannuation

    The Handbook will also support the broader financial services community, including advisors and service providers, industry groups, and the Regulatory Technology (RegTech) community.



    Why the Change?

    Financial industries regulated by APRA, such as banking, insurance, and superannuation, must adhere to specific prudential standards and guidance, as well as reporting standards. Some standards and guidance also apply across multiple industries (as cross-industry standards and guidance).

    APRA recognises that “navigating the prudential framework and the network of supporting advice can be complex”. It also notes that updates added over time have created challenges for regulated entities to find and understand requirements. The regulator says this situation has complicated the risk management process and has potentially increased the cost of compliance for Australian financial firms over the years.

    The work APRA has undertaken in the form of its Modernising the Prudential Architecture (MPA) initiative has now resulted in the Prudential Handbook, which delivers:

    • APRA-digital-prudential-handbook-04A single source of information that brings together prudential standards, prudential practice guides, associated letters to industry, information papers, and FAQs.

    • A clear view of how different aspects of the regulator’s standards and guidance, identified as core or supporting requirements, fit together. The framework also groups critical information into governance, risk management, financial resilience / business operations, and recovery and resolution planning categories.

    • An easy-to-use framework that employs powerful search and filtering functionality, information pop-ups, and an overall human-centric design.

    Additionally, the new framework enables APRA to continue building the platform for more effective adoption and support of regulation.

    APRA-digital-prudential-handbook-01Image courtesy of APRA.

     

    More Information About APRA’s Prudential Framework Pillars

    To further enhance the ease of navigating standards and guidance information, APRA has organised the framework into key pillars as follows.

    Business Operations

    Applicable to the superannuation industry. Business Operations standards require registrable superannuation entity (RSE) licensees to effectively manage operations, such as strategic planning, investment governance, risk, and insurance considerations, to see that they achieve the appropriate outcomes for members.

    Financial Resilience

    Applicable to the banking, general insurance, life insurance and private health insurance industries. Financial Resilience ensures banking and insurance firms have sufficient financial resources to withstand industry stresses, including capital management and liquidity.

    Governance 

    Applicable to all industries. Governance ensures financial firms are run with honesty and integrity and that individuals meet the fit and proper requirements of their roles of skills, knowledge, and experience.

    Risk Management 

    Applicable to all industries. Risk Management sets out the requirements for managing operational risk, as well as industry-specific risk, such as credit, insurance, and investment risk.

    Recovery and Resolution

    Applicable to all industries. Recovery and Resolution standards see that financial firms have appropriate crisis preparedness measures in place should significant stresses threaten the firm’s viability. Firms must be ready to take actions to recover financial resilience, or if recovery measures are ineffective, to enable an orderly and solvent exit from the firm’s regulated activity.

    Reporting

    Applicable to all industries. For now, these standards are not included in the Prudential Handbook. However, firms can access reporting standards on the APRA website.

     

    APRA has included core standards, supporting standards, and guidance information within each core pillar.

    The regulator says it will facilitate a smooth transition to this new resource by continuing to operate it in parallel with the existing APRA website over the “next few months”.

    Access APRA’s standards, guidance and related information via its new Prudential Handbook here: https://handbook.apra.gov.au/


    How Can MyComplianceOffice (MCO) Help?

    As your firm and its employees familiarise themselves with the new Prudential Handbook, consider the value that Regulatory Technology (RegTech) can have in helping to reduce your compliance risk and streamline compliance management efforts.

    MCO delivers a consolidated compliance management suite that helps Australian and international firms stay ahead of regulatory changes, reduce risk, and know that employees can meet the requirements of their roles.

    Stay ahead of regulatory changes and keep informed about regulation news and updates. Our Regulatory Change Manager (RCM) module, which includes horizon-scanning tools to help your firm understand changes to regulatory obligations.

    Reduce risk from third-party management. Firms need a continuous follow-up process of third parties to ensure the controls at the start of the relationship remain in place over time. Our Know Your Third Party (KYTP) risk management module automates the end-to-end process to simplify managing third-party contracts and relationships.

    Ensure employees are deemed fit and proper to perform to the requirements of their roles. Our platform supports the ongoing learning and licensing requirements of regulatory bodies across APAC and the rest of the globe. Our Representative Registrations and Licensing (RRL) module helps manage employee registration and licensing requirements with greater efficiency and visibility.

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