The prudential regulator has welcomed a report by the International Monetary Fund (IMF) backing its handling of the financial system.

The report assesses the Australian Prudential Regulation Authority’s (APRA) supervisory approach to the banking and insurance sectors, and its oversight of systemic risk.

In particular, the IMF approves of APRA’s reform of prudential regulation for insurers, and its improvement of the framework across general and life insurance.

Australia’s robust regulatory framework and prudential supervision conforms to international best practices, the IMF says in its first assessment for seven years.

APRA Chairman Wayne Byres says stress testing shows banks and insurers are resilient to significant shocks thanks to a long program to raise capital ratios, establish a more stable funding profile and increase liquid asset holdings.