International Law

APRA's statement to Senate Select Committee on Australian financial institutions

The Chairman of APRA John Laker has given his views on the effect of the current market turbulence on Australia's ADI's (banks, building societies and credit unions), insurers and superannuation funds to the Senate Standing Committee on Economics.

In a statement (pdf) on 21 February 2008 he commented on the implications of this turbulence for the financial institutions which APRA supervises and on APRA?s activities over the last year.

He concluded that the ADI sector is well-positioned to withstand the impact of global developments although "As a group, ADIs have been affected by recent turmoil in other ways as well:
? ADIs have faced increased wholesale funding costs as global credit markets, on which many ADIs have relied increasingly over recent years, have turned much more risk-averse;
? those ADIs in particular that make use of securitisation markets to fund their residential mortgage lending have found that source of funding has virtually dried up;
? in addition, some ADIs have exposures to certain high-profile domestic corporates now under stress because of their reliance on short-term debt to fund their businesses."

Although the recent equity market declines have unwound all of the 2007 market gains in major industrial countries and in Australia, the declines in equity markets will not have a significant impact on the profitability or capital levels of the general insurance industry. In the superannuation sector recent declines in equity markets will reduce the asset values of accumulation funds but these losses must be set against the substantial cumulative gains over the past few years..

Full post as published by Australian Regulatory Compliance Review on February 21, 2008 (boomark / email).