In testimony to a parliamentary committee, Australian Prudential Regulation Authority (APRA) Chair John Lonsdale set out APRA’s latest system risk assessment and regulatory agenda, highlighting the newly launched System Risk Outlook report and confirming plans to activate limits on high debt-to-income home lending from February 2026. The System Risk Outlook groups vulnerabilities into geopolitical risk, housing risks and interconnectivity linked to the growing systemic importance of superannuation. Work with other agencies on the Council of Financial Regulators includes a dedicated geopolitical risk program. On housing, APRA pointed to high household debt and a potential turning point in the financial cycle, citing high debt-to-income and loan-to-valuation borrowing and a pick-up in investor lending, and framed the proposed debt-to-income limits as pre-emptive guardrails even if not immediately binding at a system level. Phase 1 of APRA’s inaugural system risk stress test suggested superannuation can provide capital support to the banking system but may, in some circumstances, amplify vulnerabilities, with a second phase to follow. Beyond system risk work, APRA and the Australian Securities and Investments Commission (ASIC) released the 2025 Retirement Income Covenant (RIC) Pulse Check report, which found a widening gap between trustees actively promoting better retirement outcomes and those that are not, and APRA signalled direct engagement with lagging trustees. The remarks also flagged heightened supervision of platform trustees’ investment governance following the First Guardian and Shield managed investment scheme collapses, including calls for trustees to accelerate safeguards for members’ platform investments and the potential use of enforcement tools where prudential concerns are elevated. On the prudential framework, APRA pointed to modifications to governance modernisation proposals, including extending a proposed non-executive director tenure limit from 10 to 12 years and dropping a proposed early engagement requirement for significant financial institutions on responsible person appointments and succession planning, alongside consultation activity on easier access to the internal ratings-based (IRB) approach for banks, a planned third tier in the banking framework, and proposed changes affecting general insurers’ reinsurance and life insurers’ capital settings for longevity products such as annuities.
Australian Prudential Regulation Authority 2025-12-03
Australian Prudential Regulation Authority sets out System Risk Outlook and plans high debt-to-income mortgage lending limits from February
APRA Chair John Lonsdale detailed APRA's risk assessment and regulatory agenda, including the System Risk Outlook report and plans to limit high debt-to-income home lending from February 2026. APRA also emphasized collaboration with the Council of Financial Regulators on geopolitical risks, housing vulnerabilities, and superannuation's systemic role, alongside governance changes and increased supervision of platform trustees after investment scheme collapses.