Mackay Chapman August 2023 APRA Update

In this month’s APRA update:

• APRA has sought an injunction in the Federal Court of Australia to restrain an individual from engaging in unauthorised banking business and using the word “bank” without the appropriate licence;
• APRA has commenced a consultation on Prudential Standard APS 910 Financial Claims Scheme (APS 910), which is due to sunset on 1 October 2023;
• APRA has released its National Claims and Policies Database statistics for the year ending 31 December 2022;
• Final guidance on investment governance for superannuation trustees was released by APRA; and
• APRA has finalised a new prudential standard aimed at ensuring banks, insurers and superannuation trustees can better manage operational risks and respond to business disruptions.

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APRA takes action against unauthorised banking businesses

The Australian Prudential Regulation Authority (APRA) has filed a lawsuit against Andrew Morton Garrett, who is allegedly operating unauthorised banking businesses in Australia.

Garrett's businesses, which include Dynamic Capital Bank, Banque de Capital Dynamique, and Banca di Como, are not authorised to carry on banking business in Australia.

APRA is seeking an injunction to prevent Garrett from using the word "bank" to describe his businesses. APRA is also urging consumers to do their research before handing money over to unfamiliar businesses that describe themselves as banks.

Only authorised deposit-taking institutions (ADIs) licensed by APRA are legally permitted to carry on banking business in Australia.

ADIs are subject to stringent standards and requirements in areas such as capital, liquidity, governance, and risk management.

Garrett's businesses are not authorised to carry on banking business in Australia.

Read more here.

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APRA proposes to remake sunsetting standard APS 910 Financial Claims Scheme

APRA is reviewing a rule that helps banks prepare for financial crises. The rule, called APS 910, is due to expire in October 2023. APRA is proposing to make some minor changes to the rule, but it will not make any major changes at this time. APRA plans to conduct a more comprehensive review of the rule at a later date.

Read more here.

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APRA releases its National Claims and Policies Database statistics for December 2022

APRA has released statistics about professional indemnity (PI) and public and product liability (PL) insurance in Australia. The statistics cover the year ending 31 December 2022.

The statistics are from the National Claims and Policies Database (NCPD), which is a database of all PI and PL policies and claims underwritten by APRA-regulated general insurers since 2003.

The statistics include an overview of PL and PI insurance, as well as aggregate data on policies and claims for APRA-regulated general insurers and Lloyd's Australia. More detailed data will be released at a later date.

The statistics are available on the APRA website.

Read more here.

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APRA publishes final investment governance guidance

APRA has released new guidance on how superannuation trustees should manage their investments. The guidance is designed to help trustees meet their obligations under a new prudential standard that came into force on January 1, 2023.

The guidance provides more clarity on how trustees should manage liquidity, stress test their portfolios, and value assets. It also outlines how trustees should consider environmental, social, and governance (ESG) factors in their investment decisions.

APRA Deputy Chair Margaret Cole said the new guidance would help trustees "put the best financial interests of their members at the centre of investment strategies and decisions."

Cole said the reforms had been "broadly welcomed" by trustees, many of whom had already started to implement the changes.

A copy of the guidance is available on the APRA website.

Read more here.

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APRA finalises new prudential standard on operational risk

APRA has finalised a new prudential standard that will help banks, insurers, and superannuation trustees better manage operational risks and respond to business disruptions. 

The new standard, called CPS 230, will require these entities to:

• Strengthen their operational risk management by addressing weaknesses in their existing controls;
• Improve their business continuity planning so they can respond to severe disruptions; and
• Enhance their third-party risk management by ensuring that risks from material service providers are appropriately managed.

The new standard will come into effect on July 1, 2025. APRA has also released a draft Prudential Practice Guide (CPG) to accompany the new standard. The CPG will provide guidance to regulated entities on how to implement CPS 230.

APRA is inviting feedback on the draft CPG by October 13, 2023. The final CPS 230 and the response paper to the consultation are available on the APRA website.

Read more here.

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‍The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.