The Australian Prudential Regulation Authority (APRA) has released a discussion paper in relation to a pair of new standards that are aimed at strengthening the preparedness of insurers, superannuation trustees and banks to respond to future financial crises.

The discussion paper says the proposed prudential standards aim to ensure that regulated entities are better prepared for situations that may threaten their viability, building on experience in Australia and lessons learned from international peer regulators.

“For banks and insurers, progress has been made over a number of years, though material inconsistencies between levels of readiness remain,” the paper says.

“APRA is introducing new prudential requirements to improve the level of readiness across all APRA-regulated industries and ensure all entities continuously meet minimum standards in planning for financial stress events.”

CPS 190 Financial Contingency Planning would require all APRA-regulated entities to develop credible plans for managing stress that may threaten their viability.

This includes plans for rebuilding financial resilience or effecting an orderly exit.

“In doing so, this prudential standard seeks to minimise the risk of entity failure,” the discussion paper says.

CPS 900 Resolution Planning would require large or complex APRA-regulated entities to take pre-emptive actions so that, in the event of their failure, APRA can resolve them with limited adverse impacts on the community and the financial system.

“This includes ensuring that critical financial services can continue to be provided with minimal disruption,” the discussion paper says.

APRA expects to finalise the standards late next year, with plans to implement them under a staged approach.

CPS 190 would come into effect on January 1 2024 for banks and insurers and on January 1 2025 for the superannuation industry.

CPS 900 would come into effect on January 1 2024.

Closing date for submissions is April 29.

Click here for the discussion paper.