APRA’s annual report shows it hired more, spent more but also recovered more costs

The prudential regulator’s latest annual report shows it has been rapidly adding staff to deal with industry reforms.

Australian Prudential Regulation Authority chairman Wayne Byres. Picture: AAP

Australia’s financial system prudential regulator grew its spending and staffing as the Covid-19 pandemic triggered a sharemarket boom.

The Australian Prudential Regulation Authority’s annual report reveals staff numbers grew considerably in the past year, when 140 new employees were added.

This took total staffing at APRA to 844 permanent employees.

Spending also rose, climbing to $214.6m but came in below APRA’s actual $225.8m budget.

This was up on APRA’s total spending of $196.4m reported last year.

But the regulator’s increased expenses was balanced against the growing assets underpinning Australia’s financial services sector.

APRA reported a lift in total income to $232.1m thanks to higher cost recovery activities and an “over-collection” of levies on superannuation funds on the back of a big bump in June 2021 quarter assets growth.

In his preface, outgoing APRA chair Wayne Byres said the new frameworks, set to come into effect from the beginning of 2023, would “embed unquestionably strong levels of capital and ensure Australian standards adhere to the internationally agreed Basel III requirements”.

Mr Byres is due to exit APRA and no replacement has yet been announced but the report reveals $215,477.51 has been spent on recruitment advertising in the latest reporting period.

The report shows Mr Byres, who leaves APRA after eight years at the top, earned $997,412 last year.

The annual report charts APRA’s efforts across the year, noting that significant work around capital reforms across the banking landscape had been locked in.

However, the past year did see APRA’s remit shrink: Volt Bank shut its doors and a number of insurers and financial services providers exited the market.

APRA said it had performed well in reducing the number of superannuation funds with substandard practices – down from 102 in 2021 to 88.

However, APRA warned it was concerned about “friendly societies”, which faced a challenging outlook “given subdued consumer demand and the potential for deteriorating economic conditions”.

“APRA expects friendly societies to have credible recovery plans in place and will be reviewing revised recovery plans for all friendly societies over the 2022-23 financial year,” the regulator said.

APRA also raised concerns about the insurance market, noting affordability and accessibility were deteriorating due to the impact of severe weather, inflation and a general hardening of the market.

“There are no simple solutions to this issue but achieving an appropriate balance between the financial health of insurers and access to affordable and well-designed insurance for policyholders is of great importance for the Australian community,” APRA said.