From the Chair
The 2019/20 financial year was, without doubt, an extremely testing one – for APRA, for the financial sector, and for the Australian community.
A series of events at the beginning of 2020 – including the most devastating and traumatic bushfire season in memory; severe storms and flooding across vast swathes of the country’s east coast; and most significantly, a once-in-a-century pandemic – has served to severely test the resilience of the Australian financial system. Although the economic and psychological impact on households and businesses across the country has been profound and dramatic, APRA-regulated financial institutions (authorised deposit-taking institutions (ADIs), insurers and superannuation funds) have stood up to the challenge, both financially and operationally, and have continued to fulfil their critical roles in society and the economy.
This positive outcome reflects a long period of investment in financial and operational resilience, founded on a strong prudential framework. Moreover, this investment has meant that each industry has not only been able to withstand the events of the past year, but has been able to play a part – through measures such as deferring loan repayments, suspending premium increases, and facilitating prompt access to funds – in helping cushion the blow from the severe economic contraction that the Australian community has experienced in recent months.
For APRA, these events mean the 2019/20 financial year was one of two distinct halves.
In the latter part of 2019, APRA established an ambitious regulatory and supervisory agenda, based on the delivery of four key community outcomes, and commenced a number of initiatives designed to deliver these, built on an expansion of resourcing provided by the Government in the 2019 Federal Budget. Substantial internal organisational changes were also instituted, designed to respond to changes in the financial system APRA supervises, and to better equip APRA to deliver on its 2019-2023 Corporate Plan. With the onset of COVID-19, however, much of this work needed to be reprioritised to enable APRA to deploy its resources to respond to the period of severe and sudden disruption and heightened financial risk caused by the pandemic. This reprioritisation is discussed in more detail in the Statement of Performance contained in Chapter 3 of this report.
Looking forward, the intense and ongoing focus on financial and operational resilience will undoubtedly dominate APRA’s agenda in the year ahead, as the financial system continues to navigate an environment of heightened risk and considerable uncertainty.