APRA rules on risk management
The Australian Prudential Regulation Authority (APRA) has released the final version of its new risk-management standard and associated guidance – Prudential Standard CPS 220 ‘Risk Management’ and Prudential Practice Guide CPG 220 ‘Risk Management’. The new requirements are applicable to authorised deposit-taking institutions (ADIs), general insurers and life companies, as well as authorised non-operating holding companies (NOHCs), taking effect from 1 January 2015.
The new standard harmonises risk-management requirements across the banking and insurance industries, bringing together a range of risk-management requirements into a single standard. The new standard and guide reflect APRA’s heightened expectations about risk management and sound governance in response to the global financial crisis.
To aid directors’ understanding of the additional responsibilities and duties that come with being part of the board of an APRA-regulated entity, APRA has released a draft document – ‘Aid for Directors’ of authorised ADIs, general insurers and life companies. The guide provides an overview, in general terms, of the purpose of prudential regulation, the legal framework through which it is implemented, and the additional obligations applying to directors of APRA-regulated entities. It assumes that the director is an experienced board practitioner and familiar with directors’ duties.