APRA has upgraded its internal rating system, the Probability And Impact Rating System (PAIRS), which it uses to assess the more than 3000 financial institutions that it regulates.

Due for rollout in October, the new system assesses a regulated entity in terms of probability of failure and the potential impact of that failure.

Mr Thompson said it will allow APRA to “identify priority areas within the regulated population, allocate resources according to the degree of risk, and monitor market trends in risk profiles”.