The Australian Prudential Regulation Authority (APRA) outlined supervisory priorities and recent interventions, including a consultation to clarify how authorised deposit-taking institutions (ADIs) assess Higher Education Loan Program (HELP) debts in residential mortgage lending and how those debts are captured in debt-to-income (DTI) reporting. It also signalled an imminent discussion paper to update governance prudential standards and reiterated that it will escalate to enforcement action where it identifies serious prudential risks. On mortgage lending, APRA’s baseline expectation remains that banks and credit unions consider HELP repayments in serviceability assessments, but it is consulting on updating Prudential Practice Guide APG 223 to allow HELP repayments to be removed by exception where a borrower is expected to pay off the HELP debt in the near term, alongside a proposal to exclude HELP debts from DTI reporting. Macroprudential settings remain under review, with the mortgage serviceability buffer at 3 percentage points and the countercyclical capital buffer at 1 per cent of risk-weighted assets. In superannuation, APRA highlighted intensified scrutiny of fund expenditure, with newly released data showing total industry expenditure of $12.7 billion for the year ending June 2024, up 15 per cent on the prior year, and noted the sector was valued at over $4 trillion as at the quarter ending September 2024. Recent enforcement actions referenced included licence conditions imposed on Cbus (covering fit and proper processes and expenditure management), similar licence conditions on BUSSQ that are subject to a Federal Court appeal delaying an APRA-required independent third-party review, an additional $10 million capital requirement for Pacific International Insurance following deficiencies in binder holder arrangements, and an increase in the capital add-on applied to ANZ to $750 million due to heightened concerns about non-financial risk management. APRA pointed to several cross-industry initiatives taking effect in 2025, including the extension of the Financial Accountability Regime from mid-March to APRA-regulated entities in insurance and superannuation, the commencement of CPS 230 operational risk management requirements from 1 July, and its first financial system-wide stress test. A governance discussion paper is due shortly to start consultation on proposals intended to enhance board performance and director suitability for current risk conditions.

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