The Australian Prudential Regulation Authority (APRA) could do a better job in retaining its staff, according to the International Monetary Fund (IMF).

The IMF, which made the observation in its inaugural Financial System Stability Report, says APRA has increased its staff by about 50% since the collapse of HIH but it has trouble keeping them.

“Turnover among more junior staff is relatively high, which could potentially have adverse effects on its supervisory capacity,” the IMF report said.

“Financial institutions will need to put greater emphasis on risk management, especially under Basel II, increasing the demand for these skills.

“Hence it will be important to ensure that both APRA and ASIC have the financial resources, and flexibility… to ensure that sufficiently well-qualified staff are available to meet the challenges of implementing Basel II and effectively implementing principles-based approaches to supervision, especially of the large banks.”

APRA Chairman John Laker told The Age newspaper the comments are being acted on. “We acknowledge the IMF’s concern about the consequences of high staff turnover and we are addressing this in a number of ways.”