From the APRA website, the Australian Prudential Regulation Authority 
(APRA) “is an independent statutory authority that supervises institutions across banking, insurance and superannuation, and is accountable to the Australian Parliament. APRA was established by the Australian Government on 1 July 1998 following the recommendations of the Wallis Inquiry into the Australian financial system. Prudential regulation is concerned with maintaining the safety and soundness of financial institutions, so that the community can have confidence that they will meet their financial commitments under all reasonable circumstances.
ARPA’s core mission is to ensure Australians’ financial interests are protected and that the financial system is stable, competitive and efficient, and their corny forward-looking philosophy is focused on two strategic themes: “Protected today, prepared for tomorrow”, and the organisation is underpinned by the core values of Integrity, Collaboration, Accountability, Respect, and Excellence.
APRA is responsible for overseeing the following activities:
- authorised deposit-taking institutions (such as banks, building societies and credit unions), which is most important to borrowers and mortgage brokers.
- general insurers
- life insurers
- friendly societies (a friendly society (sometimes called a benefit society, mutual aid society, benevolent society, fraternal organization or ROSCA) is a mutual association for the purposes of insurance, pensions, savings or cooperative banking)
- private health insurers
- reinsurance companies, and
- superannuation funds (other than self-managed funds).
Under the legislation that APRA administers (listed below), APRA is tasked with protecting the interests of depositors, policyholders and superannuation fund members.
While APRA seeks to reduce the likelihood of a financial institution failing, it cannot, and does not, guarantee that failure may never occur. In the unlikely event an APRA-regulated institution were to fail, APRA has the role of administering the Financial Claims Scheme when activated by the Australian Government. This Scheme allows depositors of a failed deposit-taker to access their funds (up to a limit) in a timely manner, or provides general insurance policyholders with access to funds (up to a limit) to meet an eligible claim.
APRA and Home Loans
APRA is a Governing body for Authorised Deposit-taking Institutions (ADI) (such as banks, building societies and credit unions), so they will have an impact on the conditions applied to your ability to borrow. The margin applied to the published interest rate in order to determine your capacity to service a loan (and thus your borrowing capacity), for example, is determined by APRA. Those other tiered lenders that don’t have direct APRA oversight (and as regulated by Part IIB of the Banking Act 1959) may possibly see a little more flexibility as their oversight is provided by ASIC, and ASIC doesn’t necessarily enforce the same limitations (Non-ADI lenders currently account for a quite small share (<5 per cent) of total housing lending). ASIC currently enforce a 2.5% for non-banks. The 'buffer' applied to APRA's [link url="https://www.apra.gov.au/news-and-publications/apra-increases-banks%E2%80%99-loan-serviceability-expectations-to-counter-rising"]mandated (ADI) serviceability assessment is 3%, and this figure may change, albeit not nearly as often as the interest rates applied to individual products. APRA has the following to say in their Prudential Practice Guide (APG 223):
This statement tends to illustrate the ‘sensible’ (while limiting) oversight the authority has on borrowing. In addition, APRA states the following in the same document:
Difficult to apply, and not enforced by way of their use of the “would” in the opening sentence, APRA seek to introduce consistency into the market, making the selection of home loan product easier. As it stands, each bank has varying policy and assessment criteria, and this imposes significant benefits in using a mortgage broker, as they’re able to navigate the policy minefield and present product options to you that you are best suited and most likely to be approved.
In summary, APRA provide a regulatory shield between big banks and deposit taking institutions, and the borrowers.
