Most ADIs and most APRA regulated entities will have another year to conform to APRA’s new prudential standard CPS230 on operational risk management, which came into force today.
CPS2320 for now applies to Significant Financial Institutions, which in banking is those with assets in excess of $20 billion. while it applies to all other entities now, they have a 12 month extension.
“In a digital world, access to banking, insurance and super is essential for all households and businesses [and] also important, we think, for financial stability” APRA member Therese McCarthy Hockey said in a rare media briefing yesterday.
“The backdrop of risk and the chances of major disruptions have increased. We see a financial system that's become more interconnected.
“It's more reliant on service providers. It's more dependent on digital technologies and something like and as we see the geopolitical risk turmoil as a backdrop, we see the risks around cyber attacks and bad actors.”
Over the last two years, APRA has engaged industry, the major services providers and other consultants.
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“We've made an effort to make it simpler, and we had five standards. We’re actually retiring five standards, and this is just going to be one standard” Hockey said.
“We are leveraging what we believe is the better practice in the industry, because banks, insurers and super funds see it's good for their business to be operationally resilient.”
Hockey made clear this new standard is not about steering APRA entities into more insourcing.
“We don’t prescribe business models. We don’t prescribe innovation either.
“We want to create a framework for firms, so they know what they are required to do.
“We've been careful to take into account proportionality in design and implementation of this standard, so less work for small entities, and also doing things like giving them extra time at the end of the day.
“On supervision, we’ve set out a three year plan. So the three year plan means the smaller entities won't be part of thematic reviews or supervisory work until the third year, so it gives extra time there as well to mature their processes.”
Proportionality is a hot topic among smaller banks, and a theme that may be prominent in the report of the Review into small and medium banks that the Council of Financial Regulators and the ACCC are due to submit to the federal government today.