APRA has released this report analysing the self-assessments carried out by 36 of the country’s largest banks, insurers and superannuation licensees, in response to the final report of the Prudential Inquiry into Commonwealth Bank of Australia (CBA).
APRA wrote to the institutions’ boards last June asking them to gauge whether the weaknesses uncovered by the CBA Prudential Inquiry also existed in their own companies. The landmark CBA inquiry had found that continued financial success dulled the bank’s senses, especially with regard to the management of non-financial risks.
After receiving the self-assessments last December, APRA’s frontline supervision teams carried out detailed analysis and benchmarking of their quality and the key issues that institutions identified.
APRA noted a wide variation in the quality of the self-assessments; most institutions recognised the opportunity provided by the findings in the Final Report to critically examine their own organisation , however a small number of institutions took a lighter touch approach and viewed it as an exercise for APRA rather than an opportunity to drive improvement.
Consistent findings in the self-assessments included:
- non-financial risk management requires improvement;
- accountabilities are not always clear, cascaded and effectively enforced;
- acknowledged weaknesses are well-known and some have been long-standing; and
- risk culture is not well understood, and therefore may not be reinforcing the desired behaviours.