APRA responds to Government's Statement of Expectations

It helps to understand a regulator's objectives. So the release of the Government's ‘Statement of Expectations’ of the Australian Prudential Regulation Authority (APRA), as part of a reform to the governance arrangements for statutory authorities and APRA’s ‘Statement of Intent’ in response gives helpful insights.

The Government's Statement of Expectations discusses the appropriate balance between pursuing safety and protection of beneficiaries on the one hand, and market efficiency on the other.

Interestingly the Government has confirmed that "prudential regulation cannot and should not seek to guarantee a zero failure rate of prudentially regulated institutions or provide absolute protection for market participants (including consumers)."

In response APRA says it "does not pursue a zero failure objective. APRA cannot completely eliminate the risk that a financial institution might fail and it recognises that any attempt to do so would impose unnecesaary burden on financial institutions and harden the arteries of the financial system".