The Australian Prudential Regulation Authority (APRA) says it has uncovered “material weaknesses” in governance and management of non-financial risks such as culture and accountability.

APRA waded through 36 self-assessments submitted by insurers, banks and superannuation licensees, including nine general insurers, four life insurers and three private health insurers.

“In a number of cases, the weaknesses identified in the self-assessment were sufficiently material that APRA is considering stronger supervisory responses, including the application of an operational risk capital overlay,” Deputy Chairman John Lonsdale said.

Over the next 12 months APRA will strengthen prudential expectations and raise its supervisory intensity for all regulated institutions.

Mr Lonsdale says directors must demonstrate a commitment to lifting the governance and management of non-financial risks or face further regulatory action.

Financial institutions submitted the self-assessments in December after the prudential inquiry into the Commonwealth Bank of Australia uncovered operational and governance shortcomings.

Many of Commonwealth’s issues “are not unique to that institution”, APRA’s analysis found. Non-financial risk management consistently required improvement and accountabilities were not always clear and enforced.

“Significant uplift is required across industries to bring governance and the management of non-financial risks to an appropriate standard,” the APRA report says.

“This includes embedding robust frameworks that incentivise delivery of sound outcomes, proactive management of issues and consistent application of rewards and consequences.”

The institutions surveyed identified resource gaps in compliance, blurred roles and responsibilities for risk, and insufficient monitoring and oversight.

Submissions also raised a question over whether boards and senior management have “a potential blindspot” when it comes to assessing their own effectiveness, APRA says, because feedback was “notably less critical” of leadership than the rest of the organisation.

“One area of focus will be whether boards and senior leadership have been sufficiently self-critical given the wide range of weaknesses identified.”

APRA is meeting with participating institutions to provide feedback and will later outline specific observations and next supervisory steps.

The participating general and life insurers are Allianz Australia, Chubb, Genworth Financial Mortgage Insurance, Hollard, IAG, Munich Re, QBE (Australia), Suncorp, Swiss Re, AMP Life, Challenger Life, MLC and TAL Life.