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Webinar Recording: APRA update for Finance and Risk

RegCentric Webinar 18th of March 2020:

Topics covered in this webinar:

  • COVID (Risk)

  • APRA regulatory change timetable (with observations)

  • Reporting and audit

  • BASEL and data Transparency




Transcript:


APRA update in Finance and Risk

1) Thank you for joining

2) Format Change due to dynamic and fast-changing environment related to COVID19.

3) We hope to organize an in-person session in the near future.

4) To keep the session interactive we will share a few polls.


COVID 19

- We are experiencing a global pandemic. And we are seeing history develop in front of our very eyes. After the bush fire crisis, Australia and the rest of the world now faces a health crisis. Our thoughts are with the front line health care workers.

- The impact on our economy and the financial services sector is likely to be significant. While the government has announced a stimulus package to try to avoid a recession, various economists have indicated that a recession may not be avoidable.

- APRA has guidelines on Pandemic Planning – which it has released off the back off Pandemic stress tests it conducted in 2006 and 2007 in the insurance sector. It is our understanding that APRA in recent weeks has been working directly with regulated entities to take stock of their operational preparedness in anticipation of a wider outbreak of the virus. We luckily live in a time where physical social distancing is supported by technology which enables us to work from home. And while there will be a range of measures that impact the operations of banks, especially in the branch network, and some people will be incapacitated due to infection, the sector is not expected to come to a grinding halt, and in fact many organisations we work with have already moved to increased working from home arrangements, for both internal and external staff, in line with their Business Continuity Planning.

- From a direct impact perspective, the immediate APRA regulated sector that comes to mind is the insurance sector. direct impact is likely to be biggest in Health + Life will be expecting claims to increase. Especially for the PHI industry – which is already plagued with decreasing margins and intensifying scrutiny from the regulator surrounding questions of sustainability of their business models, this is not great news.

- Other industries that are regulated: the super industry will be mostly concerned about the global market turmoil will have substantial impacts on their portfolio’s.

- We already touched on the operational impact on ADI’s, and from a financial side, the impact will be a flow on impact coming from the impact the containment measures: short-term: stock markets ; money market drying up; and fx and interest rates falling. Overall resulting in some significant Market and Liquidity risk events. From a market risk perspective, we can start talking about a black swan event.

- Longer term: GDP impact, potential unemployment, housing market likely to be impacted as well. This may result in credit risk events occurring.

- Most economists agree that banks are much better prepared for an economic shock. APRA definitely supports this view and recently confirmed at the senate economic hearing committee that “the financial system is positioned to handle short-term volatility in financial markets, but navigating any period of extended stress is inevitably something that will warrant considerable vigilance.