Australia’s Financial Watchdog Rethinks Regulation Amid Rising Threats
Australia’s financial regulator is reassessing its approach to oversight as businesses face increasing challenges from cyber attacks, geopolitical tensions, and operational disruptions. Australian Prudential Regulation Authority (APRA) chair John Lonsdale emphasized the need for closer engagement between the regulator and industries beyond its traditional remit of banking, insurance, and superannuation during a speech to the Business Council of Australia.
Speaking at a boardroom lunch, Lonsdale highlighted that global instability now exceeds levels seen during the Global Financial Crisis, Brexit, and the pandemic, citing the World Uncertainty Index. Despite this, he noted that Australia’s financial institutions have remained robust due to decades of capital strengthening and risk mitigation efforts.
Lonsdale acknowledged concerns about regulatory burden, stating, “We agree that regulation is important but it’s true that it comes with a cost.” A recent survey found that while 97% of APRA-regulated entities believed the regulator’s supervision benefited them, only two-thirds thought it struck the right balance between safety and competition.
As APRA finalizes its next Corporate Plan, Lonsdale said the regulator is working to simplify its framework and reduce unnecessary compliance burdens, particularly for smaller institutions. However, he emphasized that key financial safeguards will not be rolled back. “When APRA considers where we might ease our requirements or make them more proportionate, we don’t believe there is a sound case to wind back the financial resilience we have built-up over several decades,” he explained.
The regulator is focusing on non-financial risks, which have become a top concern for many organizations. The survey revealed that regulated entities are most worried about cyber security, followed by geopolitical and operational risks. Lonsdale pointed to recent actions, including the introduction of its first prudential standard on information and cyber security in 2019 and a new standard on operational risk management set to take effect soon.
These measures aim to ensure the financial system remains secure and resilient in an increasingly volatile environment. As Lonsdale noted, “The number one concern was cyber risk. Number two was geopolitical risk. Third was operational risk.” The regulator’s efforts are geared towards finding a balance between financial safety and other considerations, including competition and efficiency.
