31 March 2022 - APRA publishes Executive Director Renée Roberts’ speech on crisis preparedness

In “failing to plan is a plan to fail”, Ms Roberts described how APRA balances the need for appropriate risk-taking by financial institutions while minimising the potential for disorderly failures that might harm bank depositors, insurance policyholders or superannuation members.

Her comments included:

• “Australia needs a financial system that harnesses the creative power of risk-taking, and the innovation and efficiencies derived from risk taking. On the other hand, it cannot have a system that is brittle and overly prone to failure – particularly catastrophic failure. Failure always involves pain and cost, but that cost must be acceptable.”
• “APRA seeks to ensure that any failures that do occur will be orderly failures. An orderly failure is one where a regulated entity hasn’t reached its intended destination, but where the entitlements of protected beneficiaries and the stability of the financial system remain intact.”
• “Leaders need to have thought seriously about financial stress scenarios, come up with a credible plan, and then tested their institution’s ability to execute this plan. If you are going to step up to the controls of one of our institutions, it is your responsibility to assure yourself that you can land it safely in the unlikely event of an emergency.”
• “The essence of financial contingency planning is our expectation that institutions must be ready to manage their own destiny in all reasonable circumstances. Boards of APRA-regulated institutions must be aware that it simply isn’t acceptable to rely on ordinary insolvency or APRA stepping in to solve the problem.”