Regulatory Update: September 2022 Edition
In the first quarter of the 2022/23 financial year, there have been a significant number of updates published by regulators, the Government and standard setting boards.
Several statements released by these parties share their strategic priorities, indicating future focus areas. This information is useful for entities across various industries, particularly financial services, to help navigate through the regulatory landscape.
This blog provides a summary of each key recent update.
ASIC shares its priorities for 2022-26
ASIC recently released its Corporate Plan for 2022-26, outlining its strategic priorities for the next four years.
ASIC’s priorities are in response to the key emerging challenges in the regulatory and economic landscape in Australia and globally. The external strategic priorities over the next four years for ASIC are product design and distribution, sustainable finance, retirement decision making and technology risks.
For more information, read: ASIC priorities for 2022-26
ASIC extends transitional relief for foreign financial services providers
ASIC has introduced the ASIC Corporations (Amendment) Instrument 2022/623 to extend the transitional relief for foreign financial services providers (FFSPs) from the requirement to hold an Australian financial services (AFS) licence to provide financial services to Australian wholesale clients.
The relief is extended for a further 12 months to 31 March 2024.
For more information, read: ASIC makes Corporations (Amendment) Instrument 2022/623
ASIC’s surveillance of internal dispute resolution in superannuation identifies concerns
ASIC has recently urged superannuation trustees to review their internal dispute resolution arrangements, following a review that found indicators of significant compliance issues.
In its update, ASIC shares observations on complaints recording, response timeframes, informing complainants of delays and process failures.
You can read more about this in our previous blog, ASIC’s current focus areas.
ASIC’s approach to breach reporting: implementation of reportable situations regime
As part of its immediate priorities, ASIC will focus on improving the operation of the reportable situations regime. The new regime was implemented via the updated Regulatory Guide 78 Breach reporting by AFS licensees which commenced on 1 October 2021.
By lodging such reports, licensees provide ASIC with the intelligence needed to identify emerging trends of non-compliance and to address significant non-compliant behaviours early.
You can read more about this in our previous blog, ASIC’s current focus areas.
Super trustees urged to improve effectiveness of target market determinations
ASIC recently performed a sample review of superannuation trustee compliance with the target market determinations (TMD) requirement and found some poor practices. The review raised concerns about the underlying arrangements that some trustees have in place to ensure their products reach the right consumers.
ASIC is calling on superannuation trustees to review and, if necessary, improve the effectiveness of TMDs for their products.
You can read more about this in our previous blog, ASIC’s current focus areas.
ASIC signs Consultation Agreement with Financial Markets Standards Board
ASIC has signed a Consultation Agreement with the Financial Markets Standards Board (FMSB) to promote global standards for fair and effective wholesale financial markets.
The Agreement will enable ASIC to be consulted in the FMSB’s development of draft guidance and other publications and provide ASIC with periodic updates on the FMSB’s strategy.
For more information, read: Consultation Agreement with Financial Markets Standards Board
APRA and ASIC release notes on Superannuation CEO Roundtable
APRA and ASIC have released public notes on the Superannuation CEO Roundtable held on 12 August 2022. The Roundtable was attended by 11 superannuation trustee Chief Executive Officers and other executives, representing a broad cross-section of the industry.
The discussion focused on the implementation of the Retirement Income Covenant, which took effect on 1 July 2022.
For more information, read: APRA and ASIC host Superannuation CEO Roundtable
APRA strengthens transparency on remuneration and bank disclosures
APRA has launched two separate consultations to improve transparency and market discipline within the financial system. One consultation will focus on proposed new remuneration disclosure and reporting requirements to support the cross-industry Prudential Standard CPS 511 Remuneration, applicable to all banks, insurers and superannuation funds regulated by APRA. This is covered in more detail in our previous blog, available here.
The other consultation focuses on APRA’s proposals to update bank prudential disclosures to align with international standards and the new bank capital framework.
For more information, read:
APRA releases response to consultation on revisions to prudential standard on investment governance
APRA has responded to consultation and released the final Prudential Standard SPS 530 Investment Governance (SPS 530), commencing on 1 January 2023. The response outlines the updates implemented to SPS 530 to ensure better member outcomes by enhancing stress testing, valuation and liquidity management practices.
For more information, read: Consultation on Prudential Standard SPS 530 Investment Governance in Superannuation
APRA increases transparency with new super publications
APRA has commenced its launch of a series of new superannuation data publications from September 2022; quarterly and annual publications comprising new and expanded data on an industry, fund and product basis.
The publications represent a key milestone in Phase 1 of APRA’s Superannuation Data Transformation (SDT), a multi-year project to drive better industry practices and improve outcomes for superannuation fund members through heightened transparency.
For more information, read: Phase 1 Breadth
APRA releases response to consultation on Phase 2 of the Superannuation Data Transformation project
In August 2022, APRA released a response paper emphasising the timelines and scope for Phase 2 of the SDT project. Phase 2 "Depth" will explore new and better approaches to data reporting, across all areas of superannuation fund operations. For more information, including the revised timeline, read: Phase 2 Depth
APRA looks to enhance strategic planning and member outcomes in super
In its recent discussion paper, APRA has proposed a range of changes to update and sharpen its prudential standard governing strategic planning and member outcomes in superannuation – Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515).
The discussion paper reflects APRA’s view on how SPS 515 and associated guidance must evolve and seeks input from the superannuation industry on the proposed revisions.
For more information, read: Discussion paper - Strategic planning and member outcomes: Proposed enhancements
APRA finalises capital guidance for authorised deposit-taking institutions
APRA has released the finalised prudential practice guides (PPGs) supporting the final capital adequacy and credit risk capital requirements for authorised deposit-taking institutions.
Alongside the PPGs, APRA has also released an updated version of Prudential Standard APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk (APS 113), and a response paper on the technical issues raised in the submissions received during the November 2021 consultation on the bank capital reforms.
For more information, read: Revisions to the capital framework for authorised deposit-taking institutions
APRA consults on new prudential standard to strengthen operational resilience
APRA is consulting on a new prudential standard designed to strengthen the management of operational risk in the banking, insurance and superannuation industries. The regulatory has introduced a new cross-industry prudential standard, Prudential Standard CPS 230 Operational Risk Management (CPS 230), which sets out the minimum standards for managing operational risk.
You can read more about this in our previous blog, available here.
APRA publishes findings from latest climate risk self-assessment survey
APRA has published the findings from its climate risk self-assessment survey conducted across the banking, insurance and superannuation industries. The voluntary survey was issued in March 2022 and designed to provide insights into how APRA-regulated entities are aligning their practices with the expectations set out in Prudential Practice Guide CPG 229 Climate Change Financial Risks, released in November 2021.
Survey responses suggest APRA-regulated entities are generally aligning well to APRA’s guidance, especially in the areas of governance and disclosure. However, climate risk remains an emerging discipline compared to other traditional risk areas.
For more information, read: Information paper - Climate risk self-assessment survey
APRA publishes joint address with ASIC on the retirement income covenant
APRA published remarks delivered jointly by its Executive Director of Superannuation, Suzanne Smith, and ASIC’s Executive Leader for Superannuation, Jane Eccleston, to the Conexus Retirement Conference in Canberra. The remarks particularly focus on the new retirement income covenant.
For more information, read: APRA – Suzanne Smith and ASIC – Jane Eccleston - Speech to the Conexus Retirement Conference
APRA publishes Deputy Chair Helen Rowell’s speech to Risk Australia conference
APRA published a speech delivered by Deputy Chair Helen Rowell at the Risk Australia conference in August 2022.
In her speech entitled “Scaling the challenges of strong risk governance”, Ms Rowell highlighted recent examples of poor risk management in the insurance industry to demonstrate the need for stronger board oversight and accountability, greater engagement of risk professionals in risk conversations, and enhanced risk culture within Australia’s financial sector.
For more information, read the full remarks: APRA Deputy Chair Helen Rowell - Speech to the Risk Australia 2022 conference
APRA publishes Member Margaret Cole’s remarks to AIST Conference of Major Superannuation Funds
APRA published remarks delivered by APRA Member Margaret Cole to the AIST Conference of Major Superannuation Funds in Brisbane on 7 September 2022. In her speech, Ms Cole commented on the MySuper performance test, driving member outcomes, the retirement income covenant, APRA’s data collection approach and its priorities moving forward.
For more information, read the full remarks: APRA Member Margaret Cole - Speech to the AIST Conference of Major Superannuation Funds
APRA finalises amendments to general insurance reporting framework
In August 2022, APRA released final reporting standards for general insurers to support the operation of the Government’s cyclone and related flood damage reinsurance pool. The standards will be administered by the Australian Reinsurance Pool Corporation (ARPC).
The six reporting standards clarify that reinsurance recoverables are not subject to a capital charge and include the ARPC in the definition of an “APRA authorised reinsurer".
For more information on the reporting standards, read: Cyclone and related flood damage reinsurance pool
APRA outlines plans to modernise the prudential architecture
APRA has outlined plans for its multi-year program to modernise the architecture of prudential standards and guidance for banks, insurers and superannuation funds. This is a core strategic initiative to make the design of the regulatory framework clearer, simpler and more adaptable. The program commenced last year and is intended to ensure the framework continues to underpin financial safety and stability in a rapidly changing economic and technological environment.
For more information, read: APRA outlines plans to modernise the prudential architecture
APRA aligns capital and reporting frameworks for insurance with AASB 17
APRA has finalised changes to the capital and reporting frameworks for insurance in response to the introduction of the new accounting standard Australian Accounting Standards Board 17 Insurance Contracts (AASB 17). The changes aim to minimise any regulatory burden caused by a misalignment between APRA’s frameworks and AASB 17, while ensuring sound prudential outcomes.
The revised prudential and reporting standards will come into effect from 1 July 2023.
For more information, read the response paper and final standards at: New accounting standard – AASB 17 Insurance contracts
APRA finalises new capital framework for private health insurers
APRA has also finalised the capital framework for private health insurers. The new framework enhances policyholder protection by seeking to ensure that private health insurers maintain an appropriate level of financial resilience to absorb unanticipated losses. The standards also align with the introduction of AASB 17. The framework takes effect from 1 July 2023.
For more information, read: Review of the private health insurance capital framework
Superannuation performance test treatment of faith-based products
Consultation is now complete in relation to the exposure draft legislation for the treatment of faith-based products when applying the annual superannuation performance test.
The legislation seeks to:
require trustees to apply to APRA for faith‑based product status,
subject faith‑based products to a supplementary test that considers their faith‑based investment strategy, if they fail the original test, and
exempt faith‑based products from the consequences of failure if they pass the supplementary test.
For more information, read: Superannuation Performance Test Treatment of Faith-based Products
Delay to the ASX CHESS Replacement Project and Independent Review
The ASX has recently announced further delay to the Clearing House Electronic Sub-register System (CHESS) Replacement project. To assist ASX to confidently determine a new go-live date, Accenture has been appointed to provide an independent review of the new CHESS application software.
For more information, read: ASX Delay to the CHESS Replacement Project
Global agreement on corporate taxation: addressing the tax challenges arising from the digitalisation of the economy
On 8 October 2021, Australia joined over 130 other countries in endorsing proposed international corporate tax reforms to address the challenges arising from the digitalisation of the economy. These reforms were developed by the OECD Inclusive Framework on Base Erosion and Profit Shifting and presented as a two‑pillar solution that would help ensure that multinationals pay their fair share of tax in the jurisdictions in which they operate.
Treasury has now launched a public consultation for interested parties to comment on how Australia can best engage with the two-pillar solution.
ISSB receives global response on proposed sustainability disclosure standards
As mentioned in our previous blog, ‘Managing greenwashing risk for your company’, the International Sustainability Standards Board (ISSB) is establishing a comprehensive global baseline of sustainability disclosures designed to meet the information needs of investors in assessing enterprise value.
The first two proposed standards, one in relation to general sustainability-related disclosure requirements and the other for climate-related disclosure requirements, were released for consultation on 31 March 2022.
Since then, the ISSB has received more than 1,300 comment letters on its two proposed sustainability disclosure standards.
For more information, read: IFRS - ISSB receives global response on proposed sustainability disclosure standards
International Accounting Standards Board sets out its 2022–2026 priorities
The IFRS Foundation's International Accounting Standards Board (IASB) has published its Third Agenda Consultation Feedback Statement and Snapshot outlining its priorities for the next five years.
The IASB’s three main strategic priorities are to:
Progress current projects.
Maintain the strategic direction and balance of its activities while slightly increasing efforts to develop digital financial reporting and improve understanding and accessibility of IFRS Accounting Standards.
Add intangibles, statement of cash flows and climate-related risk in financial statements to the work plan.
For more information, read: IFRS - International Accounting Standards Board sets out its 2022–2026 priorities
IASB publishes proposals to update its Accounting Standard for small and medium-sized entities
The IASB has also published proposals to update the IFRS for SMEs Accounting Standard to reflect improvements made to full IFRS Accounting Standards, while keeping the Standard suitable for small and medium-sized entities.
The proposals reflect feedback on the Request for Information published in 2020 as part of its Second Comprehensive Review of the Standard and the advice from the IASB’s SME Implementation Group.
For more information, read: IFRS - IASB publishes proposals to update its Accounting Standard for small and medium-sized entities
How we can help
Hall Advisory’s team of specialists can assist you to navigate through these regulatory updates, determine their impact on your business and effectively respond to the changes to achieve compliance.
For more information, please contact us for a confidential, no-obligation consultation.