APRA letter to Treasurer Chalmers and Minister Gallager, 12 August 2025

Dear Treasurer and Minister

Thank you for the chance to take part in final week’s investor roundtable. The roundtable generated a spread of concepts for supporting Australia’s productiveness and was a constructive engagement for APRA.

This letter units out the actions we are going to soak up response to points raised throughout the roundtable, constructing on my letter of 31 July 2025. Collectively, these actions will allow us to advertise the protection and stability of the monetary system in a balanced and environment friendly method. We have outlined particular actions that we’ll take inside clear timeframes – none of those require further funding or sources. We have additionally made some solutions for legislative change the place we administer applications on behalf of Government. 

Comments from contributors on the roundtable strengthened the significance of a robust and steady monetary system for long-run productiveness. Confidence within the Australian monetary sector stays crucial to attracting the capital that households and companies must develop and make investments, in addition to guarding towards a build-up of systemic vulnerabilities within the Australian system. 

During the dialogue, contributors typically agreed that Australia’s prudential regulatory settings are broadly match for function. They additionally highlighted sure areas the place they thought regulatory frameworks could possibly be improved to help productiveness. In your closing remarks you summarised 9 actions, directing two at APRA. Our response is ready out under.

• Proportionality. Later this yr, we are going to seek the advice of on a proposal to introduce a 3rd tier into our proportionality framework for banks. We have additionally began to have interaction with Treasury on the design of a potential fourth tier, which might additional cut back prudential necessities of very small banks.¹ You have requested trade for suggestions on this. We will proceed to work with Treasury on obligatory safeguards for a fourth tier, together with enhancements to the Financial Claims Scheme and contemplating refinements to liquidity help preparations.
  
• Data reporting. At the roundtable, I requested for suggestions on areas the place trade considers there to be pointless burden from reporting, corresponding to from duplication or inconsistencies. We are at present following up with contributors who raised this as a problem. Over coming months, we are going to interact with a broader inhabitants of entities to determine potential further choices for lowering burden. The Assistant Treasurer additionally famous that the Regulatory Initiatives Grid could possibly be expanded to incorporate information collections. We will interact with Treasury on this.

Treasurer, you talked about a number of actions on the roundtable that can require collaboration throughout a number of stakeholders, together with: 

• Statement of expectations. You urged that you’d take into account a stronger deal with productiveness in regulators’ statements of expectations. In 2023, you up to date APRA’s assertion of expectations, setting a clearer focus for APRA on proportionality, minimising regulatory burden and supporting sustainable financial development. We have taken these expectations critically. As set out in my earlier letter, we now have made a number of modifications to our framework in recent times to cut back burden and enhance proportionality; over the subsequent 12 months, we are going to implement further actions to additional help productiveness and innovation.
  
• Review of small and medium-sized banks. We are progressing the actions we now have dedicated to as a matter of precedence. We are already consulting on proposed modifications to our licensing framework, which would scale back the time taken to course of new financial institution functions by round half. To present trade with adequate alternative to contemplate our proposed modifications, we are going to interact with our friends via the Regulatory Initiatives Grid to make sure applicable staging. Our deliberate timings for every measure are set out under.

Figure 1: APRA’s actions from the Council of Financial Regulator’s overview into small and medium banks

Action	Timing
Simplifying APRA’s licensing framework (motion 6)	September quarter 2025 – public session already underway. Submissions are due by 31 October 2025.
Providing higher readability on APRA’s supervisory expectations for financial institution capital changes (motion 3)	September quarter 2025 – phased implementation to begin
Introducing additional proportionality (three tiers) (motion 1)	December quarter 2025 – deliberate public session
Promoting entry to inner capital modelling (motion 2)	December quarter 2025 – deliberate public session
Considering the remedy of coated bonds as High-Quality Liquid Assets and whether or not complete encumbrance limits must be launched (motion 8)	June half 2026 – deliberate public session
Reviewing regulatory reporting necessities (motion 5)	September quarter 2025 – additional engagement with trade
The Government ought to take into account its openness to APRA taking a lighter-touch strategy to the regulation of very small banks (suggestion 9)	APRA is working with Treasury

• Performance Test. In my letter of 31 July, I famous our plans to look extra intently at sure laws that APRA administers on behalf of Government. During our dialogue on the roundtable, I raised the Performance Test for example. Our view is that we have to stay open to other ways of attaining worth for members to make sure we finest stability the prices and advantages. While the Performance Test has had a major optimistic affect from payment financial savings to members, some stakeholders raised potential considerations in regards to the potential affect of the take a look at on productiveness.² You indicated that you’d be contemplating this additional – we’re participating with Treasury on potential choices to boost the Performance Test.

My current letter additionally famous our work that we’re doing to deal with overlap between reporting obligations that apply to entities underneath APRA’s health and propriety requirements and statutory necessities underneath the Financial Accountability Regime (FAR). My letter additional indicated that there could possibly be further choices for lowering the executive burden of the FAR, while preserving the integrity of the substantive accountability provisions. We are participating with Treasury and the Australian Securities and Investments Commission on this.

Finally, on the roundtable I discussed a possibility for a much less time-consuming and resource-intensive strategy to enforcement. Our powers to hunt penalties for wrongdoing are an necessary software in our toolkit. However, there are circumstances the place the time and useful resource burden on the celebration being investigated is disproportionate, corresponding to the place court docket motion is the one possibility. For offences of an administrative nature and the place regulatory findings are agreed to, it will be extra environment friendly for APRA to problem a sanction, as is the case for APRA’s abroad friends. Over coming months, we are going to study this additional and supply Treasury with urged choices for streamlining enforcement actions, corresponding to extending present infringement discover provisions.

We stay up for persevering with to work with Government in help of bettering productiveness. I’m, in fact, blissful to elaborate and talk about additional.

Yours sincerely
 

John Lonsdale