Funding for the Australian Prudential Regulation Authority (APRA) is to be increased by $52.4million over four years to ensure that Australia’s prudential regulator remains adequately resourced and has sufficient skills and expertise to perform its functions.
The Royal Commission into the failure of HIH Insurance noted that building the skills of front line supervisors, including specialist industry and technical expertise, was a priority. In last year’s budget, which was handed down shortly after the Royal Commission reported, a first step was made in addressing this recommendation. The Government consulted with the new APRA members over the last year and believes that this Budget’s additional funding will ensure that APRA is sufficiently resourced to professionally undertake all of its regulatory responsibilities.
This increase in funding will principally enable APRA to build up staff levels in front-line supervision and in specialist risk areas, such as insurance, credit, balance sheet, market and operational risk. These additional staff will enable APRA to establish dedicated teams of front line supervisors to deal with large groups, strengthening its capacity to supervise large, complex and systemically important financial institutions.
Funding has also been provided from 2005-06 to enable APRA to strengthen its capabilities as Australia’s statistical collection agency for the financial sector.
APRA will also receive additional funding direct from the Government in 2004-05 and 2005-06 to complete its assessments of whether a number of individuals meet ‘fit and proper’ criteria to remain within the general insurance industry in view of the HIH Royal Commission’s findings and to take any consequent actions.
Apart from the HIH ‘fit and proper’ funding, the costs of these measures will be recovered from regulated institutions. In line with previous funding provided to APRA relating to the HIH Royal Commission, the funding for the ‘fit and proper’ assessments will not be recovered from industry.