The Australian Prudential Regulation Authority (APRA) says Australian financial institutions – particularly general insurance – are in fine health compared to those in other advanced economies, thanks partly to its own ability as a regulator.

APRA released its annual report on Friday, in which Chairman John Laker distanced the Australian market from the symptoms of the US subprime crisis.

“The root causes… have no close parallel for financial institutions supervised by APRA,” he said. “Nonetheless, Australia is an active participant in global financial markets and has not been immune from their recent protracted bouts of turbulence.”

Dr Laker says the fortunes of general insurers have been determined by severe weather rather than exposure to the financial elements.

He says Australia’s prudential supervisory framework “is widely acknowledged to have performed well during the market turbulence”.

In line with international efforts to strengthen prudential oversight, APRA’s immediate to-do list includes implementing proposed enhancements to the Basel II Capital Framework and fine-tuning the approach to liquidity risk management.  

APRA has also begun preparing for its new role as administrator of the Federal Government’s new Financial Claims Scheme should it be required in the event a bank or general insurer collapses.