The Financial Regulator Assessment Authority’s (FRAA’s) latest report on the effectiveness and capability of Australia's financial services regulators is to be provided to the relevant government minister this month and tabled in parliament. 

The FRAA assesses the Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC). 

APRA Chair John Lonsdale said on Wednesday the prudential regulator recently completed its bi-annual stakeholder survey, which seeks feedback from insurers and other entities it regulates on the effectiveness of its processes and communications. 

“The survey results have been provided to the FRAA which is completing its independent assessments,” Mr Lonsdale said in an opening statement to the Senate Economics Legislation Committee. 

“Pleasingly, one of the key findings is that most entities believe that APRA’s supervision benefits their industry and helps to protect the financial wellbeing of the Australian community.” 

The final FRAA report is due to the minister in June, he said, adding "its appraisal will be an important input as we endeavour to continually evolve APRA as a high performing institution”. 

Mr Lonsdale said APRA continues to tackle key issues in insurance availability and affordability, while cyber issues, operational and climate risk all remained key focus areas, and industry engagement on remuneration was upcoming.   

Other challenges and risks APRA remains focused on include an uncertain economic outlook, heightened inflation risks, geopolitical risks, contagion risks from offshore, and unforeseen shocks.  

“This means APRA’s intensified monitoring and supervision continues,” Mr Lonsdale said. 

Earlier this month, APRA finalised new requirements and guidance aimed at strengthening the preparedness of insurers, banks and superannuation funds to respond to a crisis, he said, and APRA expects to publish a new cross-industry standard on operational risk management “in the next month or so”.  

This standard, CPS 230, is designed to strengthen the management of operational risk, including the management of contractual arrangements with service providers.   

“These initiatives, alongside our broader direction in preserving the safety, resilience and community confidence in the system will be detailed further in our updated Corporate Plan and Annual Report, due out in August and October respectively,” Mr Lonsdale said.   

“In these uncertain times, APRA needs to be extra vigilant in managing the resilience of the system to protect depositors, insurance policyholders and superannuation members.”   

Key supervision priorities include heightened supervision of cyber resilience through detailed assessments and rigorous pursuit of breaches, embedding the capital reforms for banks and insurers, and ongoing work to address challenges in the availability, affordability and sustainability of insurance. 

The FRAA was established in response to a recommendation of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. It reports every two years to enhance external accountability mechanisms.  

The inaugural FRAA review, released in August, said there were important opportunities for ASIC to enhance its performance, including a “substantial uplift” in its data and technology capability and stronger focus on enhancing the quality of its engagement with stakeholders.