Authors
Aabid Farouk
Tom Holmes
APRA’s 2025-26 Corporate Plan sets out the regulator’s strategic objectives for the next four years and supervisory priorities for the next 12 to 18 months.
The Plan emphasises fewer new rules, but higher expectations. APRA will focus on optimisation rather than expansion of its regulatory framework, reducing burden where possible while sharpening focus on resilience, governance and system stability. This article considers how the Plan will shape Australia’s financial services sector and the practical implications for firms, their leaders and governance teams.
Strategic Direction
The Plan is anchored on four objectives:
- Maintaining financial and operational resilience;
- Responding to significant and emerging risks;
- Getting the balance right; and
- Improving APRA’s organisational effectiveness.
These objectives set the direction for APRA’s supervisory agenda in the year ahead. Resilience and emerging risks drive initiatives on operational risk management, climate scenario testing and system-wide stress testing. The emphasis on balance underpins reforms aimed at reducing unnecessary regulatory burden through proportionality and streamlining. APRA is also investing in its systems and workforce, and working more closely with other regulators to strengthen supervision.
The Plan reflects a shift from regulatory build-out to regulatory calibration. Firms should prepare for greater scrutiny in high-risk areas but also opportunities for efficiency, particularly for smaller institutions, through APRA’s proportionality measures.
Strengthening Resilience
CPS 230 and operational resilience
From 1 July 2025, CPS 230 (Operational Risk Management) took effect for all APRA-regulated entities. Non-significant financial institutions (being those smaller entities or those not listed on APRA’s SFI register) have until 1 July 2026 to meet business continuity and scenario analysis requirements. The standard consolidates and replaces several older prudential standards, requiring boards to take responsibility for resilience, oversee third-party arrangements and ensure plans are in place for disruption events.
In addition, APRA-regulated entities were required to submit a register of their material service providers by 1 October 2025. This obligation is designed to give APRA a system-wide view of third-party dependencies and assess concentration risks where multiple entities rely on the same external providers.
Over 2025-26, APRA will engage with entities to test compliance with the new framework. Its initial supervisory focus will be on significant financial institutions, including through targeted prudential reviews. Cyber resilience and third-party dependencies remain central priorities, consistent with APRA’s broader emphasis on operational risk, continuity and incident response.
System-wide stress testing
APRA has undertaken its first system-wide stress test, simulating a significant financial market disruption alongside a major operational risk event. The scenario was designed to test potential feedback loops and interconnected risks between banking and superannuation. APRA has confirmed the exercise is well progressed, with results to be published in the second half of 2025–26. The regulator will then collaborate with industry and other agencies to address vulnerabilities identified.
Climate risk
APRA highlights climate change as a key risk to financial stability, particularly through more frequent and severe weather events. Its focus is on the insurance sector, where rising premiums and reduced coverage may also create flow-on risks for banks. In the second half of 2025–26, APRA will release the results of its Climate Vulnerability Assessment for the general insurance sector, undertaken with Australia’s five largest insurers using detailed premium data. The findings will show how insurance affordability is likely to change over the medium term.
Key Takeaway: Resilience continues to be a supervisory priority. Boards should complete a CPS 230 gap analysis and be ready to address issues if the system-wide stress test highlights vulnerabilities across the sector.
Governance Under Scrutiny
Governance standards review
APRA will consult in the second half of 2025--26 on refreshed governance prudential standards. It has noted that almost 80% of entities under heightened supervision exhibit underlying governance issues. In APRA’s March 2025 Governance Discussion Paper, it proposed reforms to various prudential standards such as CPS 510 Governance, CPS 520 Fit and Proper, and SPS 510 Governance. Boards can expect the consultation to focus on director capability, fitness and propriety, conflict management, board performance and renewal, and potential tenure limits for non-executive directors.
Superannuation oversight
Superannuation trustees can expect targeted assessments of expenditure in 2025--26, with APRA focusing on whether fund spending delivers value for members. It will also review the governance and member outcomes of major platform providers, including processes for onboarding, monitoring and removal of investment options. Together with ASIC, APRA will conduct a pulse check on the retirement income covenant in the first half of 2025-26, examining how trustees are implementing retirement income strategies and identifying areas where practices fall short. APRA will also publish new superannuation data in the 2026 Comprehensive Product Performance Package.
Broader accountability
APRA confirms that governance, risk culture and accountability remain central supervisory priorities. The Plan highlights that many entities under heightened supervision show governance weaknesses, and APRA has made clear it will escalate supervision and take enforcement action where frameworks are inadequate.
Key Takeaway: Boards and trustees should expect closer testing of governance and risk frameworks, with the possibility of enforcement where shortcomings are identified.
Refining the Framework
Streamlining regulation
APRA has committed to reducing unnecessary burden while maintaining resilience. The 2025-26 Plan outlines nine initiatives to achieve this. Key measures include:
- Introducing a third tier in the banking prudential framework - designed to apply proportionality more consistently to smaller institutions.
- Simplifying licensing processes - with a stated goal of halving approval times, easing entry and expansion for new and existing players.
- Clarifying access to internal capital models - to improve transparency and certainty for institutions seeking to use advanced modelling.
- Supporting affordable reinsurance for general insurers - recognising the impact of rising costs on coverage and stability.
- Removing duplicative requirements - such as overlaps between APRA’s fit-and-proper reporting obligations and the Financial Accountability Regime.
- Strengthening data-sharing with peer regulators - to reduce duplicate information requests and improve efficiency across the regulatory system.
Together, these measures aim to improve proportionality for smaller institutions without compromising safety or resilience.
Consultation load
The Plan also confirms a scaling back of large, resource-intensive consultations. Instead, APRA will focus on targeted refinements to existing standards. For industry, this means fewer broad reforms to absorb but a need to stay engaged in narrower consultations to shape how proportionality measures are implemented.
Key Takeaway: APRA’s reforms are intended to ease compliance costs while maintaining resilience. Firms should stay engaged in consultations to ensure efficiency gains are realised in practice.
Organisational Effectiveness
APRA is investing heavily in organisational effectiveness, with a $73.2 million program to modernise its supervisory toolkit. A new cloud-based data platform (due December 2025) and a redesigned supervision management system (due November 2025) will provide supervisors with real-time insights and streamline reporting. The transition to APRA Connect by 2027 will cut legacy processes and is expected to lower industry compliance costs by around $6 million per year. These upgrades are supported by stronger data governance, enhanced cyber and privacy controls, and the introduction of AI to optimise oversight. Alongside technology, APRA is investing in staff capability through leadership development and scenario-based training, aimed at ensuring supervisors can respond quickly and effectively to emerging risks.
APRA continues to emphasise its coordination role through the Council of Financial Regulators, working with ASIC, the Reserve Bank, Treasury and the ACCC. Together, these changes mean regulated entities will face a supervisor with faster access to data, richer insights across the system and a greater ability to escalate issues quickly.
Key Takeaway: APRA’s internal upgrades will enable more effective and timely supervision and more efficient data exchange. Regulated entities should anticipate more data-driven engagement and prepare for regulatory responses that are faster and more targeted.
Looking Ahead
APRA’s 2025-26 Corporate Plan marks a shift from rule-making to calibration. It sets fewer new standards but imposes stronger supervisory expectations. Scrutiny will focus on operational resilience, governance and superannuation outcomes, while reforms on proportionality and streamlining aim to reduce unnecessary burden.
Less burden does not mean less responsibility. Firms that can demonstrate preparedness, accountability and resilience will be best placed to meet APRA’s expectations in the next regulatory cycle.
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