In November 2023, APRA commenced consultation on proposed changes to Prudential Standard APS 210 Liquidity, designed in response to the lessons learned from events in early 2023 – most notably the March 2023 collapse of SVB. The proposals set out fundamental changes to the Minimum Liquidity Holdings (MLH) regime and in their current form, have significant impacts for ADIs operating under the MLH regime. All MLH ADIs need to closely analyse the costs and operational impacts of these proposals and start preparing now for the inevitable transition to a more complex, and specific regulatory regime.
With all eyes on greenwashing, it is worthwhile taking a closer look at the details of the three court actions ASIC has initiated, to help other firms understand and address greenwashing risks before they too raise the ire of the corporate regulator. How well are emerging risks being integrated with risk management frameworks and what should you look out for?
It’s an ordinary Tuesday afternoon, when, picking up emails between meetings, the bad news comes in – there has been a serious issue in your business line. Details are not fully known yet, but it’s probably a breach and goes back quite some time. The corporate crisis management processes are already kicking in, but your mind turns to your own individual accountability. This isn’t the first time something has gone wrong, but now not only is your bonus and your job at risk, so is your future in the industry. Could you be disqualified for this major failure?
You start mentally walking backwards through the cascade of events and decisions that led to this outcome – something obviously went wrong somewhere – but had the organisation, had you, taken reasonable steps to prevent it, and, importantly, can you prove it?
After three iterations and much debate, the 2023 FAR Bill finally passed in September 2023 and takes effect for RSE licensees and insurers from March 2025. Although it seems like a relatively long lead time (on top of an even longer build up), experience with the predecessor Banking Executive Accountability Regime (‘BEAR’) suggests that such a fundamental shift in how entities and executives are expected to behave takes significant time and energy to implement. For super fund trustees, the time for action is now.
Prudential Practice Guide SPG 530 Investment Governance (SPG 530) has been finalised. Importantly, there are a series of key actions that boards and management need to take, especially with APRA’s thematic review uncovering a considerable number of existing inadequacies and highlighting the centrality of board responsibility in addressing these issues.
Regulators are closely scrutinising how financial firms respond to customers facing difficulty – whether in hardship applications or collections activities; whether conduct towards the customer, forecasting and modeling or in their analysis and systems for predicting and reporting for non-performing loans. Getting it wrong is not only a compliance risk, but an enormous reputational risk.
With that in mind, based on our experiences we pose a series of questions we think all leaders should consider.
‘[A] potentially vulnerable sector globally’
That’s how the Bank of England described commercial property in its March 2023 Financial Policy Committee meeting. Heightened risks are now receiving heightened attention. How resilient are commercial property loan portfolios in a scenario where there is yield expansion and a tenancy recession (lower rental income) combined with higher interest rates? In this Risk Insights we cover:
- The data dilemma
- Segments matter
- Portfolio management
- Turning data and insights into opportunity
2023 will be the year that tests the resilience of loan portfolios and collections capabilities as the impacts of higher interest rates and inflation start to bite. In this Risk Insights piece, we highlight four key credit risk issues to keep in mind when lenders are reviewing credit risk management strategies and appetite for the year ahead.
APRA highlights its expectation that ADIs are appropriately pre-positioned to be able to control growth and the composition of lending, if needed. In this Rhizome Risk Insight Article, we explore what you need to consider in managing high debt to income (DTI) portfolios.
Why does it take Royal Commissions, media reports, shareholder activism and litigation before boards and senior leaders recognise that issues of culture, and the behaviours it may engender, represent material risks to business outcomes?
Most financial institutions have adopted the three lines of defence risk management system. History has shown that it has not prevented the occurrence of risk failures since its emergence. In theory, it sounds like a relatively simple concept – in practice, it has been difficult to implement and embed.
Credit Suisse’s report provides important insights about how risk management practices failed and how the identified weaknesses are being remediated.
Boards and executives should use the report to reflect and challenge themselves about the way risks are being managed in their own organisations – going deeper than surface-level observations to understand what’s really happening in practice.
On 2 October 2019, ASIC released the first report from its corporate governance taskforce: ‘Director and officer oversight of non‑financial risk. The depth of the report is a strong indicator of the level of scrutiny this category of risk will continue to receive from regulators in the coming years.
There is considerable uncertainty about the financial position of small businesses which have been hardest hit by the pandemic and the flow-on impacts for income producing property. Additionally, the pandemic has accelerated changes in the structural demand for office and retail space.
Lenders with rich data and sophisticated portfolio management practices will be better positioned to navigate through this period of uncertainty – able to quickly identify opportunities to strategically adjust underwriting standards, policies and portfolio allocations with the requisite clarity and confidence.
As the pandemic rages, households and businesses will be reaching peak debt and beyond in the foreseeable future.