Banking, Insurance and Life Insurance (prudential standard) determination No. 2 of 2014 - Prudential Standard CPS 232 - Business Continuity Management

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Legislation au F2014L01651 Not in force Legislative Instrument

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Banking, Insurance and Life Insurance (prudential standards) determination Nos.  1 and 2 of 2014

 

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority

Banking Act 1959, subsections 11AF(1) and 11AF(3)

Insurance Act 1973, subsections 32(1) and 32(4)

Life Insurance Act 1995, subsections 230A(1) and 230A(5)

Legislative Instruments Act 2003, paragraph 6(d)

APRA may, in writing, vary or revoke a prudential standard that applies to an APRA-regulated institution under:

  • subsection 11AF(3) of the Banking Act 1959 (Banking Act), in relation to authorised deposit-taking institutions (ADIs) and authorised non-operating holding companies (authorised banking NOHCs);
  • subsection 32(4) of the Insurance Act 1973 (Insurance Act), in relation to general insurers and authorised non-operating holding companies (authorised insurance NOHCs); and
  • subsection 230A(5) of the Life Insurance Act 1995 (Life Insurance Act), in relation to life companies (including friendly societies) and registered non-operating holding companies (registered life NOHCs).

APRA may, in writing, determine a prudential standard that applies to an APRA-regulated institution under:

  • subsection 11AF(1) of the Banking Act, in relation to ADIs and authorised banking NOHCs;
  • subsection 32(1) of the Insurance Act, in relation to general insurers and authorised insurance NOHCs; and
  • subsection 230A(1) of the Life Insurance Act, in relation to life companies (including friendly societies) and registered life NOHCs. 

Pursuant to paragraph 6(d) of the Legislative Instruments Act 2003 (the Legislative Instruments Act), such prudential standards are legislative instruments for the purposes of the Legislative Instruments Act.  

 

  1.    Background

In January 2014, APRA released a new cross-industry prudential standard Prudential Standard CPS 220 Risk Management (CPS 220), to apply to ADIs, general insurers and life insurers, and Level 2 and Level 3 groups. A revised Prudential Standard CPS 510 Governance (CPS 510) was also released to ensure risk management governance principles were aligned to the new CPS 220.

The new and amended standards come into effect from 1 January 2015.

CPS 220 and revised CPS 510 necessitate a series of amendments to existing industry-specific and cross-industry standards. The majority of changes are necessary to remove duplications or to update references.

2.      Purpose and operation of the instruments

The instruments make changes to Prudential Standard CPS 231 Outsourcing (CPS 231) and Prudential Standard CPS 232 Business Continuity Management to incorporate references to CPS 220.

On 3 December 2014, APRA made the following determinations (the instruments) under the relevant provisions of the Banking Act, Insurance Act and Life Insurance Act:

  1. Banking, Insurance and Life Insurance (prudential standards) determination No. 1 of 2014, which revokes Prudential Standard CPS 231 Outsourcing made under Banking, Insurance and Life Insurance (prudential standards) determination No.1 of 2012 and determines a new Prudential Standard CPS 231 Outsourcing (CPS 231); and
  2. Banking, Insurance and Life Insurance (prudential standards) determination No. 2 of 2014, which revokes Prudential Standard CPS 232 Business Continuity Management made under Banking, Insurance and Life Insurance (prudential standards) determination No.2 of 2012 and determines a new Prudential Standard CPS 232 Business Continuity Management (CPS 232).

The instruments will take effect on 1 January 2015.

 

3.      Consultation

APRA undertook a seven week consultation on the proposed consequential changes from August 2014.

4.      Regulation Impact Statement

A Preliminary Assessment was submitted the Office of Best Practice Regulation who confirmed that a Regulation Impact Statement is not required.

5.      Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.

 

 

 


Attachment A

 

 

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Banking, Insurance and Life Insurance (prudential standards) determination Nos 1 and 2 of 2014

 

These instruments are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the Legislative Instruments

 

The instruments make changes to Prudential Standard CPS 231 Outsourcing) and Prudential Standard CPS 232 Business Continuity Management to incorporate references to Prudential Standard CPS 220 Risk Management.

Human rights implications

APRA has assessed these instruments and is of the view that they do not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.  Accordingly, in APRA’s assessment, the instruments are compatible with human rights.

Conclusion

These instruments are compatible with human rights as they do not raise any human rights issues.

 

Overview

The Banking, Insurance and Life Insurance (prudential standards) determination Nos. 1 and 2 of 2014 were enacted to update and refine the prudential standards that govern the operations of APRA-regulated institutions, including authorised deposit-taking institutions, general insurers, life insurers, and their respective holding companies. These determinations were made under the authority granted by subsections of the Banking Act 1959, the Insurance Act 1973, and the Life Insurance Act 1995, with the aim of ensuring that these institutions adhere to consistent and up-to-date regulatory standards. The Australian Prudential Regulation Authority (APRA) is the enacting body responsible for these determinations, which are designed to address gaps and update references within existing prudential standards to align with the newly introduced Prudential Standard CPS 220 Risk Management and revised Prudential Standard CPS 510 Governance. These instruments aim to streamline and modernise the regulatory framework, ensuring that risk management and governance practices are effectively integrated across the financial services sector.

Scope and Application

The Banking, Insurance and Life Insurance (prudential standards) determination Nos. 1 and 2 of 2014 apply to APRA-regulated institutions, including authorised deposit-taking institutions, authorised non-operating holding companies, general insurers, authorised insurance non-operating holding companies, life companies (including friendly societies), and registered non-operating holding companies. The determinations are made under the Banking Act 1959, Insurance Act 1973, and Life Insurance Act 1995, and extend across the Commonwealth of Australia. The determinations revoke existing Prudential Standards CPS 231 Outsourcing and CPS 232 Business Continuity Management, and introduce new versions of these standards that incorporate references to the new Prudential Standard CPS 220 Risk Management. The new standards take effect from 1 January 2015. There are no stated exclusions or exemptions, but the application of the standards may be varied or revoked by APRA under the relevant legislation. The instruments are compatible with human rights as they do not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Key Provisions

The Banking, Insurance and Life Insurance (prudential standards) determinations Nos. 1 and 2 of 2014 introduce modifications to existing prudential standards that apply to APRA-regulated institutions (subsections 11AF(3) of the Banking Act 1959, 32(4) of the Insurance Act 1973, and 230A(5) of the Life Insurance Act 1995). Specifically, these determinations revoke the existing Prudential Standard CPS 231 Outsourcing and Prudential Standard CPS 232 Business Continuity Management, and introduce new versions of these standards. These new standards are intended to align with the broader requirements of the newly introduced Prudential Standard CPS 220 Risk Management, ensuring consistency and coherence across the prudential regulatory framework. These determinations will take effect from 1 January 2015. The obligations imposed by these determinations on APRA-regulated institutions include compliance with the new Prudential Standard CPS 231 Outsourcing and Prudential Standard CPS 232 Business Continuity Management. Regulated entities must ensure that their outsourcing and business continuity management practices align with the updated standards, which now incorporate references to the Prudential Standard CPS 220 Risk Management. This entails a comprehensive review and potential revision of existing policies, procedures, and risk management frameworks to ensure they meet the updated regulatory requirements. Breaches of these prudential standards can lead to enforcement actions by APRA. Although the specific civil or criminal penalties are not detailed in the explanatory statement, non-compliance with APRA's prudential standards generally can result in regulatory sanctions, including financial penalties, public reprimands, and in severe cases, revocation of authorisation or operational restrictions. The exact penalties will depend on the nature and severity of the breach, as well as any prior history of non-compliance by the institution.

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