Mackay Chapman July 2024 APRA Update

In this month’s APRA update:

• APRA Finalises Cross-Industry Guidance on Operational Resilience;
• APRA Releases Quarterly Authorised Deposit-Taking Institution Statistics for March 2024;
• APRA has Published Further Guidance on the Your Future, Your Super Performance Test;
• APRA Releases Response on Superannuation Promoter Definition;
• APRA Clarifies Expectations on Cyber Security and Adequacy of Backups; and
• Federal Court Finds Individual in Contempt for Breaching Orders to Stop Unauthorised Banking Business.

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APRA Finalises Cross-Industry Guidance on Operational Resilience ‍

Australia's financial regulator, APRA, has finalised guidelines to help banks, insurers and superannuation providers manage operational risks and plan for disruptions. This follows a standard released last year that takes effect in July 2025.

The guidelines aim to ensure these institutions can withstand disruptions and continue serving their customers. Key changes include a shorter, more focused guide and an extra year for smaller institutions to comply with certain requirements.

APRA emphasises the importance of operational resilience in today's digital financial landscape. They aim to maintain high industry standards while minimising compliance burdens for smaller players.

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‍APRA Releases Quarterly Authorised Deposit-Taking Institution Statistics for March 2024

Australian banks (ADIs) are in a strong position to weather potential economic challenges, according to the latest quarterly reports by APRA, the industry regulator.

Here's a quick rundown:

• Capital: ADIs have more capital than ever before, despite facing narrower profit margins and slower profit growth. Overall profitability remains steady compared to the past decade.
• Liquidity: Banks have ample liquidity, exceeding minimum requirements. This is especially important as the government's Term Funding Facility program nears its end in June 2024.
• Loans: There has been an increase in non-performing loans, but these are mostly well-secured, limiting potential losses.
• Residential Mortgages: Mortgage lending is growing at a slower pace but remains above pre-pandemic levels, even with rising interest rates.
• Commercial Real Estate: Lending for commercial properties is also slowing down, although industrial real estate is still seeing strong demand. There's a slight increase in non-performing commercial loans, but overall these remain low.

See the statistics in full here.

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‍APRA has Published Further Guidance on the Your Future, Your Super Performance Test

The Australian Prudential Regulation Authority (APRA) has released new information to help with the administration of the government's Your Future, Your Super Performance Test. This information comes in the form of a Frequently Asked Questions (FAQs) document which clarifies how to handle specific situations in the 2024 Performance Test.

The FAQs address reporting on investment options with unspecified or inapplicable domicile and listing types, how to handle Separately Managed Accounts, and the appropriate benchmark for administrative fees and expenses.

You can find the FAQs document on the APRA website.

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‍APRA Releases Response on Superannuation Promoter Definition

APRA has released its response to the consultation on the proposed updates to the “promoter” definition under Reporting Standard SRS 101.0 Definitions for superannuation data collections.

The consultation response is available on the APRA website at: Phase 1 Breadth.

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‍APRA Clarifies Expectations on Cyber Security and Adequacy of Backups

Australia's financial regulator, APRA, is reminding banks, insurers and other regulated institutions about the importance of data backups for cyber security. This follows their focus on cyber resilience outlined earlier.

APRA has identified shortcomings in data backup practices across the industry. These weaknesses could make it difficult to restore systems in the event of a cyberattack. APRA expects all regulated entities to review their backups and fix any problems they find.

You can find more information on the APRA website.

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‍Federal Court Finds Individual in Contempt for Breaching Orders to Stop Unauthorised Banking Business

An Australian court has found Andrew Morton Garrett in contempt for continuing to operate unauthorised banking businesses. APRA took legal action against Garrett last year after he offered financial services through entities like "Dynamic Capital Bank" despite lacking proper authorisation.

The court permanently banned Garrett from using the word "bank" or offering banking services in August 2023. However, APRA accused him of continuing these activities. The judge agreed and fined Garrett $10,000, suspended on the condition of compliance.

This case highlights APRA's commitment to protecting Australians from unknowingly depositing money with unauthorised institutions. Consumers can verify an institution's legitimacy by checking APRA's register of authorised banks or contacting them directly.

More can be found here.

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.