The next Australian Prudential Regulatory Authority chairman will face challenges including a declining housing market, an insurance industry under increasing pressure from climate change and a rapidly consolidating superannuation sector with a long tail of small, uncompetitive funds.

Chairman Wayne Byres said on Tuesday he would step down in three months, leaving Treasurer Jim Chalmers a tough recruitment task to find a candidate well-versed in the detail of prudential supervision, as well as the Australian political landscape.