30 per cent of institutions require APRA oversight

APRA australian prudential regulation authority chairman risk management

11 August 2006
| By Mike Taylor |

The chairman of the Australian Prudential Regulation Authority, John Laker, has revealed that as many as 30 per cent of the financial institutions supervised by APRA have some element of their operations requiring higher than normal examination.

In a speech delivered to company directors in Adelaide in early August, Laker said that while 70 per cent of institutions fell into the “normal” category requiring no action on the part of the regulator, most of the remainder fell into the “oversight” category — meaning they “had some aspect of their risk position or operations — such as minor but persistent weaknesses in the control framework or insufficient capital — that requires more extensive examination”.

He said that only a very small percentage of institutions being overseen by APRA fell into the categories worse than “oversight” — “mandated improvement” and “restructure”.

“‘Mandated improvement’ institutions are operating outside APRA’s acceptable bounds for prudent risk management,” Laker said. “These institutions must have a sensible remediation plan and they may be subject to more intense supervisory attention via formal directions or enforceable undertakings, although APRA’s persuasive powers and a cooperative response are often sufficient.

“Institutions in ‘restructure’ are no longer viable in their current form and need some combination of new management, new ownership or new capital, or a new business arrangement,” he said. “As you would expect, these institutions are subject to vigorous supervisory intervention.”

Laker said that currently, around 70 per cent of APRA’s risk-rated institutions were in the “normal” category and almost all the remainder were in “oversight”, with only a small percentage in the “mandated improvement” or “restructure” categories.

“Ideally, APRA would like to see institutions in the ‘normal’ and ‘oversight’ categories improving, or at least not deteriorating, and institutions in the ‘mandated improvement’ and ‘restructure’ categories transitioning to those other categories or exiting the industry, preferably without loss to beneficiaries.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 3 weeks ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 3 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 3 weeks ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

1 week 2 days ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

4 weeks 1 day ago

The Reserve Bank of Australia's latest interest rate announcement has left punters disheartened on Melbourne Cup Day....

1 week ago