FRAA launches first review of APRA's 'effectiveness and capability'

2 minute read 09.11.2022 Kate Hilder, Siobhan Doherty

We outline the scope and focus of the FRAA's first 'targeted assessment' of APRA

Key takeouts

The Financial Regulator Assessment Authority (FRAA) was established on 29 June 2021 by the Financial Regulator Assessment Authority Act 2021 to give effect to the (then) government's response to Hayne recommendations 6.13 and 6.14. It is an independent statutory body tasked with assessing and reporting on the effectiveness and capability of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA)
The FRAA's first report on ASIC's capability and effectiveness was publicly released on 25 August 2022.
The FRAA has now commenced a review of the effectiveness and capability of the Australian Prudential Regulation Authority (APRA). The focus is on the regulator's supervision and resolution functions in the superannuation context. FRAA has sought stakeholder feedback on ten questions by 15 December 2022.

The Financial Regulator Assessment Authority's (FRAA's) first review of the effectiveness and capability of the Australian Prudential Regulation Authority (APRA) is a 'targeted assessment' of APRA's supervision and resolution functions in the superannuation context, including within this, the regulator's use of data, data analytics and supporting technology.

A consultation paper released by FRAA provides more detail around the scope of the review and puts forward ten questions for stakeholder feedback.

Supervision function

FRAA's review will consider the effectiveness of APRA's 'frontline supervision' – ie the various activities carried out by the regulator to identify and respond to significant prudential risks - and APRA's capability to carry out these activities effectively.

The consultation paper seeks stakeholder feedback on the following six questions:

'Are APRA’s supervisory priorities clearly communicated by APRA staff to the regulated population and external stakeholders?
Does APRA clearly communicate and implement its supervision activities, and are supervision activities appropriately targeted?
How effective is APRA’s supervision in achieving APRA’s objectives? Are there any gaps in APRA’s supervisory activities in superannuation?
To what extent does APRA have the appropriate organisational capabilities (including, people, data, technology, and systems) for detecting prudential risks, prioritising issues, and conducting its supervisory activities to achieve the right outcomes?
What steps has APRA taken to effectively reduce the regulatory impost of its supervisory activities? How could APRA improve?
How has APRA’s supervisory activities and the nature of its relationship with stakeholders changed following recent independent inquiries and reviews?'

Resolution function

The review will also consider the effectiveness of APRA’s resolution function – ie the effectiveness of APRA's approach to planning for and implementing responses to the failure of a regulated institution or a crisis in the financial system – focusing on superannuation.

FRAA has requested stakeholder feedback on the following four questions:

How well is APRA’s resolution function communicated to and understood by the regulated population?
How well has APRA prepared industry for the introduction of APRA’s resolution framework?
How effective is APRA’s resolution function in promoting appropriate outcomes for members?
To what extent does APRA have the appropriate organisational capabilities (including, people, data, technology, and systems) for achieving the right outcomes?'

Out of scope

The review will not consider matters that are already under consideration by other reviews or consultations, including the review of the Your Future, Your Super laws.
The review will also not assess or report on single cases.