Australia’s financial regulators and central bank have outlined plans to improve policy and regulatory architecture to better support the shift to digital and align with the changing economic and technological environment.

The Australian Prudential Regulation Authority (APRA) announced it would be “modernising” its prudential standards to make its regulatory framework clearer, simpler and more adaptable to keep pace with ongoing industry changes.

In a statement, the regulator said it will focus on several initiatives to update its infrastructure, including:

• Better regulation – ensuring prudential standards and guidance are easier to navigate, understand and implement
• Digital first – exploring how to use technology to support better regulation
• New risks, new rules – developing new approaches to tackle emerging risks and new business models on the regulatory perimeter.

“Since APRA’s creation in 1998, the prudential framework has expanded and evolved in response to new risks, changes in legislation and developments in the external environment,” APRA Chair, Wayne Byres, said.

“With 140 prudential standards and prudential practice guides now covering the five APRA-regulated industries – as well as letters, information papers and FAQs – the framework has become more complex, and in turn more challenging for entities to follow.

“We need to ensure the framework is clear, simple and adaptable, to continue to be effective in setting minimum standards for banks, insurers and superannuation funds as technology, business models and community expectations change.

“Our end-goal is a digital framework that will be easier for industry to understand and comply with, and for APRA to supervise and maintain – and ultimately to better protect Australians’ financial interests.”

The Council of Financial Regulators also said in its Quarterly Statement for September that it is continuing to “focus on the evolution of the financial system and Australia’s regulatory arrangements in response to new technologies”.

“It discussed the Reserve Bank’s collaboration with the Digital Finance Cooperative Research Centre (DFCRC) on a pilot project for a CBDC,” the statement said.

“The Council has an open mind as to whether a public policy case will emerge to support the issuance of a digital form of the Australian dollar by the Reserve Bank. Members also discussed progress with the modernisation of payments system regulation in Australia.”

The Reserve Bank of Australia (RBA) also said it has been monitoring the ongoing shift to electronic payments and the generation of new digital payment methods to understand the “implications for payments policy and regulation”.

“A key focus recently was completing a major review of retail payments regulation, which led to the implementation of new policies to enhance the efficiency and competitiveness of the payments system,” the RBA’s Payments System Board Annual Report for 2022 said.

“The emergence of new technologies continues to drive fast-paced innovation in the payments system. Australians are readily embracing new payment trends, particularly those offering value propositions for greater speed and convenience.

“The Bank has an important role in understanding these new technologies and innovations, as well as any implications for the competition, efficiency and stability of the payments system. A key focus has been on investigating the potential use, benefits and other implications of central bank digital currency.”