Role of Apra

Topics: Fractional-reserve banking, Banking, Capital requirement Pages: 3 (1162 words) Published: August 11, 2011
APRA was established following the Wallis Committee’s recommendation in 1 July 1998 under Australian Prudential Regulation Authority Act. In the amended Banking Act 1959(Cth), responsibility for the conduct of prudential supervision and depositor protection moves from the Reserve Bank to APRA. Its intention is to provide for a ‘more consistent, competitively neutral and efficient approach to the regulation of financial institutions, while enhancing overall depositor protection and financial system stability’1. This paper will thus find out about ARPA’s responsibilities related to banking in traditional sense of the term. First of all, a quick glance at ‘what is a bank’ should be made and it can come to surprise to find that the old Banking Act contained no definition of ‘bank’. The amended Act remedies this situation by providing more clearly the activities involved in the concept of banking business in Australia under s5 or an exemption in s7 and s112.Following this, all the references to "banks" have been changed to "authorised deposit-taking institutions (ADIs) which is authorised by APRA under s9 of Banking Act. Basically, key characteristics of banking in short are taking money on deposit and lending. There is no doubt that the primary responsibility of APRA is prudential supervision of financial sector which is clearly pointed under s11B Banking Act with the term ‘prudential matters’ defined in s5(1). S11AF empowers APRA to issue prudential standards for banks and bank holding companies. It also revokes a licence (s9A), issues enforceable directions should Prudential Standards be breached (s11CA) or appoints an investigator (s13A) 3. In addition, S62 Banking Act empowers APRA to obtain any information from institutions and in cases of severe financial difficulty, APRA has the power to wind up the institution and distribute its assets. More importantly, in the ‘harmonised’ prudential standards released in 1999, a capital adequacy framework and risk...
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