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The 2021 prudential outlook: unpacking APRA’s regulatory roadmap

Updated: Mar 2, 2021


Blink... and you may have missed it, as many financial entities limped through the holiday period following a year disrupted by border closures, severe operational changes and economic uncertainty, APRA made over 30 announcements in December and January 2021. The theme of these announcements indicate that the prudential regulator has shifted back to its traditional modus operandi and will maintain a heighten focus on crisis readiness and operational resilience over the coming years.


In this article we take a look at APRA’s recent policy and supervision announcements as well as some of the evolving challenges for regulated entities caused by the COVID-19 pandemic. We also provide insights into ongoing supervision activities and outline APRA’s ADI implementation roadmap for new and amended standards. Lastly, we unpack what these proposed changes mean for governance and regulatory reporting teams.


The regulatory landscape


Nearly a year has passed since the Australian Government declared COVID-19 a global pandemic. In response to the economic crisis APRA pivoted its supervisory policies and regulatory priorities to support entity’s operational resilience and maintain critical services in the financial system. This resulted in the postponement of several public consultations, the introduction of additional reporting requirements and the delayed implementation of the D2A regulatory reporting platform replacement APRA Connect. The timeline below summaries key regulatory and public announcements over the last 6 months.

GDP growth figures from the December 2020 quarter confirm the technical recession is over, however the RBA warns that the road to recovery will be uneven and drawn out. A two-speed economy is emerging in Australia as the entertainment, travel and hospitality industries continue to be impacted more severely than other sectors by sporadic border closures, isolated changes to social distancing rules and strict travel policies. While the full financial impact from the events of 2020 is still to be felt, the imminent rollout of a COVID-19 vaccine program brings renewed business and consumer confidence.


Key regulatory announcements


APRA recently published its supervision and policies priorities for 2021. Policy priorities such as strengthening crisis preparedness, including the development of a new prudential standard on resolution and recovery planning, along with updates to standards on operational risk, governance and risk management will come as no surprise to industry. Similarly, a supervision agenda focused on financial system resilience and crisis readiness together with increased scrutiny on cyber security capabilities will not catch regulated entities off guard. Put simply, the 2021 priorities are largely a resetting of the agenda APRA originally planned for 2020.


Perhaps learning from its own operational challenges from the events of 2020, APRA appears to have left slack in its policy implementation timelines. Work to lift governance, culture, remuneration and accountability standards across industries will continue and be accompanied by more cultural deep dives at large financial entities. Basel III (IV) standards will be finalised in 2021, marking a long-awaited milestone and leaving entities with less than 2 years to implement this major reform. Disclosure requirement changes are scheduled to come into effect in 2023.

Underlying APRA’s 2021 supervision priorities is the regulators transition from its PAIRS and SOARS framework, in