The Australian Prudential Regulation Authority (APRA) has published an information paper describing the modernisation of its prudential architecture through a series of key initiatives. The modernisation programme, which began last year, is intended to increase regulatory stability around emerging technologies over the coming years.
The key initiatives set out include improving regulation, ensuring guidance is more streamlined and easier to implement, a ‘digital first’ approach that will explore how to apply supervisory technology (suptech) and regulatory technology (regtech) to support regulation, and a new approach to regulating new risks and business models resulting from emerging technologies.
Introducing the paper, Wayne Byres, who chairs APRA, said: “Our end-goal is a digital framework that will be easier for industry to understand and comply with, and for APRA to supervise and maintain – and ultimately to better protect Australians’ financial interests.”
Pointing to the increased adoption of regtech, such as compliance automation through machine readable regulation, the ‘digital first’ approach aims to ease the navigability and accessibility of the prudential framework for programmers through the use of a standard that supports regtech and governance, risk and compliance (GRC) systems.
To diminish the risks presented by emerging technologies, such as crypto-assets and blockchain technology, alongside new business models on the perimeter of prudential regulations like banking-as-a-service, the APRA intends to develop an integrated approach to regulation, enhancing existing regulations as opposed to creating new ones.
The need for digitisation arises from the complexity of the APRA’s existing architecture, which has expanded since its genesis in 1998. “With 140 prudential standards and prudential practice guides now covering the five APRA-regulated industries – as well as letters, information papers and FAQs – the framework has become more complex, and in turn more challenging for entities to follow,” Byres said. “We need to ensure the framework is clear, simple and adaptable, to continue to be effective in setting minimum standards for banks, insurers and superannuation funds as technology, business models and community expectations change.”
Meanwhile, the Monetary Authority of Singapore (MAS) has also released a map outlining plans for transformation through to 2025, though with a focus on digitising financial infrastructure, rather than its own architecture.
The release and related speech discuss plans to promote the development of digital infrastructure and platforms, namely the creation of a central funds settlement utility which would centralise data flows for subscription, redemption, and general record-keeping, and facilitate reconciliation of fund data flows with the goal of reducing settlement time and improving efficiency. The release also outlined plans to deepen industry capabilities in Web 3.0, artificial intelligence, and green FinTech.
[Photo credit: Australian Prudential Regulation Authority]