POWERED BY MOMENTUM MEDIA
APRA chief warns on outsourcing beyond regulation
The Australian Prudential Regulation Authority (APRA) chairman, Wayne Byres has pointed to the risk of banks and other financial institutions becoming heavily reliant on unregulated technology providers.
In a speech delivered in Sydney this week, Byres pointed to technology and outsourcing as representing major challenges for regulators such as APRA.
“Outsourcing and partnering are far from new concepts, but increasingly it is occurring for business-critical functions, not just at the periphery of activities,” he said. “Importantly, many of these new partners and providers of critical functions sit outside regulators’ reach.”
Byres said that, in such circumstances, the prudential supervisors’ ability to ‘kick the tyres’ would be much harder in future, without new tools and methods.
“Two potential risks arise from this broader trend,” he said.
“The first is a possible fragmentation, as niche specialist providers disaggregate existing business models by performing specific roles and functions more efficiently and effectively than incumbents can do in-house,” the APRA chairman said. “An ecosystem of small providers will challenge management models, as well as regulatory understanding of risks, as more data and activity sits outside the (increasingly narrow) regulated entity.”
“It poses an interesting thought experiment: in the extreme, if all the processes in a bank were disaggregated into their specialist parts, which parts would we call ‘the bank’?”
“The second risk is, in some sense, the opposite – the systemic risk of an ostensibly large and diverse number of entities all dependent on just a few unregulated providers for critical services, creating a substantial concentration risk and increasing the threat of contagion in the event of a service failure,” Byres said.
He said that another challenge could come from the so-called TechFins – large technology companies moving into financial services.
Recommended for you
In this latest edition, Anna Shelley, CIO at AMP, shares the fund’s approach to current market conditions and where it continues to uncover key opportunities.
The mega fund has announced a $2.2 billion investment in a leading data centre platform, bringing its global real assets portfolio to nearly $60 billion.
In this latest edition, Australian Retirement Trust’s head of global real assets Michael Weaver explains the fund’s approach to finding new opportunities as it surpasses $300 billion in funds under management.
Fund managers remain hopeful for a Chinese revival story despite the “disappointing” stimulus package announced this week.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
