9 Prudential regulation framework
Prudential regulation of the Australian financial system is undertaken by the Australian Prudential Regulation Authority (APRA) and aims to ensure that, under all reasonable circumstances, financial promises made by regulated entities are met within stable, efficient and competitive financial markets. It is aimed at ensuring that the quality of a financial institution’s systems for identifying, measuring and managing the various risks in its business act to reduce the risk of failure and that, where failure does occur, public confidence in the financial system is maintained while the entity makes an orderly exit.
Australia’s prudential framework is primarily risk-based, consultative, consistent and in line with international best practice. This risk-based approach recognises that management and boards of supervised institutions are primarily responsible for financial soundness of their respective institution. Where difficulties arise within a regulated financial institution, intervention by the regulator will be proportionate to the seriousness of the problem and level of risk to policyholders and industry.
Previous: 8 Auditing
Next: 10 Mechanism for dealing with problem banks and insurers