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Our approach to supervision

This page describes our approach to the supervision of registered banks and licensed insurers and regulation of non-bank deposit takers to promote the maintenance of a sound and efficient financial system.

Our approach to supervision 

Our purposes for regulating and supervising regulated entities are set out in the Acts that give us our powers. 

We regulate banks and non-bank deposit takers to avoid the significant damage to the financial system that could result from their failure.

For insurers, our regulation and supervision promotes public confidence in the insurance sector.

Our AML/CFT supervision model is underpinned by a relationship model and an outcomes focused and risk based approach.

What our approach does

Our supervisory approach:

  • supports market participants' ability to make informed choices about risk
  • supports a competitive and diverse financial system
  • encourages directors and managers to manage their institutions soundly 
  • maintains clear, minimum standards for financial institutions
  • does not seek to eliminate risk, but provides for risk levels to be well-signalled and for the risk of high-impact failures to be acceptably low
  • in the event of major problems, seeks to minimise their impact on the wider economy, the financial system and depositors and/or policyholders.

We also: 

  • harness and enhance market disciplines where possible or, if more is required, use tools that directly constrain market choices
  • develop and maintain a good working knowledge of the institutions we supervise and of the sorts of risks they are taking on
  • collaborate closely with the Australian authorities to supervise financial institutions that are actively engaged on both sides of the Tasman.

Main features of our approach

The main features of our approach are:

  • standards for financial and non-financial disclosure 
  • minimum financial requirements in selected areas, including capital
  • rules around corporate governance, corporate structure and risk management
  • regular engagement with directors and senior managers of institutions with a potentially high impact on financial system stability
  • close relationships with relevant home authorities, especially in Australia
  • an analytical and systematic approach to assessing risk in supervised financial institutions.