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Webinar recording: APRA's Response to COVID-19

RegCentric Webinar 8th of April 2020:

Topics covered in this webinar:

  • An overview of the current COVID-19 financial landscape

  • Recognition of Expected Credit Losses

  • Recent APRA supervision, policy and reporting changes

  • Q&A




Transcript:


APRA update in Finance and Risk


Thank you for joining


A lot has changed over the last couple of weeks. When we provided an update on COVID-19 3 weeks ago, the world looked quite different than in does today. In our session we provided an update on the areas of focus for APRA and their focus for 2020 and beyond. Many changes have happened in the last few weeks and today we will give an update on the announcements made by APRA that are important for finance and risk departments.


The current crisis has moved very fast and we thought I’d be worth spending a few minutes on establishing the timeline of this crisis. This slide shows the timeline from the first cases of pneumonia of an unknown cause being reported in China back in December until today. We also indicated some of the key APRA activities during this time, and as you can see APRA was very much in a business as usual mode back in December.


The World Health Organisation declared a health emergency in January, after thousands of new cases were reported in China, but the focus at that time was still very much on China. The first case in Australia was recorded on the 25th of January. That is actually only 10 weeks ago. In February, the number of cases gradually increased domestically, but countries overseas were starting to see quite significant number of cases. In Australia, regulators and the government as a whole is still very much in Business As usual, although behind the scenes, APRA is taking its first steps in assessing the potential impact of the events surrounding COVID-19 and ensuring APRA itself is protecting its operations and its staff.


On March 11, the WHO declares corona a global pandemic. On March the 12th of March, the Australian government announces its first stimulus package. On March 16, travelers entering Australia need to self-isolate for 2 weeks. On March 20 the borders closes. On March 22 the government announces its second stimulus package, lifting the total to 189 billion. (this includes 90 billion from RBA). On March 30, the government announces its jobkeeper scheme, adding an additional 130 billion worth of economic stimulus. And several more targeted measures have been announced later. The pace of policy announcements has been extraordinary, as is the scale of the government interventions.


We are the 8th of April today, and Australia seems to have been quite successful and flattening the curve at this stage, which can be seen on the very useful infographic the government publishes on a a daily basis.


We know there are still many unknows. In terms of the length and extent of the lockdown. In terms of the next steps of lessening the restrictions. We don’t know when businesses will be allowed to reopen. We don’t know when we’ll be allowed to travel again, domestically; let alone internationally. We do know the economic shock is going to be big. We know there are sectors that have seen their entire revenues dry up overnight. And we do know this situation is unlikely to improve for many months, maybe even longer. We know that this will mean credit and liquidity risk event materializing. We see rating agencies adjust credit ratings. We also know the markets tend to react wildly in uncertain times and that volatility is at historic highs. We know there are many households that will experience hardship.


But we now also know that the government is acting decisively to absorb economic shock and that also the banking industry has vowed to do their part in ensuring Australia is the best possible position on the other end of this crisis so it can recover from this shock. That business can restart with their employees on the other side. We also know that the banks are not at the heart of the problem such as during the GFC, and that they are starting this crisis with strong balance sheets. We have also seen regulators shift priorities to support the industry in shifting own priorities to focus on their customers. As mentionen, in today’s session, we will cover the changes made by regulators that are most relevant to Finance and Risk departments.


I will start with some of the key packages announced by Australian Federal Government:

- The government has announced over 200 billion in direct support to businesses and households. This includes measures such as the jobkeeper payment and the measures to boost the cashflows for employers. If you want to get a detailed breakdown of all the measures for households or businesses, our friends at BDO and Deloitte provide quite good insights, especially from an accounting and tax perspective.