Context: financial services, prudential regulation, reserve requirements, insurance, superannuation, bank, Australia
The Australian Prudential Regulation Authority is the regulator of the prudential management of Australia's financial institutions. Established in 1998 by the Australian Prudential Regulation Authority Act, it combines the functions of the now-defunct Insurance and Superannuation Commission and some functions of the Reserve Bank.
The object of APRA is stated in the Australian Prudential Regulation Authority Act (as amended), section 8:
(1) APRA is established for the purpose of regulating bodies in the financial sector in accordance with other laws of the Commonwealth that provide for prudential regulation or for retirement income standards, and for developing the policy to be applied in performing that regulatory role.
(2) In providing this regulation and developing this policy, APRA is to balance the objectives of financial safety and efficiency, competition, contestability and competitive neutrality.
Put simply, its aim is to ensure financial institutions under its control, namely banks, insurance companies, credit unions, building societies, friendly societies and (large) superannuation funds, are financially sound at all times. It seeks to ensure that each of these institutions have systems in place to identify risks to their ability to meet their liabilities (to depositors or policyholders), and to develop plans to manage such risks.
APRA sets and enforces standards such as reserve requirements, liquidity and corporate governance. It requires its regulated institutions to report regularly their financial status to APRA, and APRA have extensive powers to ensure that its regulations are complied.
Whilst some of APRA's funding comes from the government, most of APRA's revenue comes from the financial institutions themselves, in the form of fees.