Following its December 2010 consultation package, the Australian
Prudential Regulation Authority (APRA) has
released four prudential standards, intended to consolidate 12
existing standards across the authorised deposit-taking, general
insurance and life insurance industries.
The consultation package included drafts of:
Prudential Standard CPS 510 Governance (CPS 510
Prudential Standard CPS 520 Fit and Proper (CPS 520 Fit
Prudential Standard CPS 231 Outsourcing (CPS 231
Prudential Standard CPS 232 Business Continuity Management
(CPS 232 Business Continuity Management).
The final consolidated prudential standards (CPSs 510, 520, 231
and 232) are substantially similar to the consolidated drafts.
However, APRA has made minor amendments and editorial changes
in response to stakeholder submissions.
In addition, requirements relating to business continuity
management and outsourcing currently contained in Prudential
Standard GPS 221 Risk Management: Level 2 Insurance(GPS
221) are being transferred into the relevant consolidated
prudential standard. To facilitate this, GPS 221 has been
reissued with these provisions omitted.
The relevant amendments are summarised as follows:
Delegation of Board functions
Submissions sought clarification on APRA's intention
regarding the ability of the Board to delegate certain functions
going forward. APRA has confirmed that the ultimate
responsibility for outsourcing and business continuity management
rests with the Board (or equivalent) of the regulated
However, APRA has identified areas of operational efficiency
that may involve certain functions being delegated to senior
management or a Board committee. As such:
Subparagraph 22(d) of CPS 231 Outsourcing has been amended to
enable the Board to delegate involvement in approving an
Paragraph 14 of CPS 232 Business Continuity Management has been
retained. APRA does not consider the completion of a risk
management declaration a function that can be delegated to senior
To avoid confusion about APRA's expectations, CPS 232
Business Continuity Management has been amended to remove a
paragraph of the standard requiring the Board to ensure that
sufficient resources are allocated and maintained.
As noted in the consultation package, CPS 510 Governance
includes a requirement for the Board of each regulated institution
that operates as part of a corporate group to approve the use of
any group policies and functions in keeping with its
responsibilities. APRA considers this to be prudent governance
CPS 231 Outsourcing
CPS 231 Outsourcing has been amended to clarify that, where a
foreign ADI, Category C insurer or eligible foreign life insurance
company has entered into an outsourcing agreement with its head
office, they are not required to:
execute a legally binding outsourcing agreement; or
demonstrate that they have taken into account contingency
issues should the outsourced activity need to be brought in-house.
CPS 232 Business Continuity
CPS 232 Business Continuity Management has been amended to
clarify the definition of business impact analysis. The amendment
clarifies that business impact analysis is:
a process performed to identify the critical business
operations. As such, a regulated institution cannot simply
conduct a business impact analysis for critical business
operations, rather, analysis must be conducted across the board in
order to determine which operations are critical.
While APRA anticipates that all regulated institutions will be
affected, it does not expect the effects to be significant.
Nevertheless, in order to allow sufficient time for regulated
institutions to review and ensure continued compliance with the
requirements, the consolidated prudential standards will be
effective from 1 July 2012.
The consultation package also indicated APRA's intention to
harmonise existing industry-specific Prudential Practice Guides
(PPGs) relating to governance, fitness and
propriety, outsourcing and business continuity management. APRA
expects to release draft consolidated PPGs for consultation in
 APRA will provide further guidance on the
role of the Board and senior management in the associated
Prudential Practice Guides as appropriate.
 Consistent with current Prudential Standard
 In accordance with CPS 232 Business
This report does not comprise legal advice and neither
Gadens Lawyers nor the authors accept any responsibility for
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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