By Paulina Duran
SYDNEY, Oct 6 (Reuters) - Australia's prudential regulator introduced on Tuesday a new supervisory system to strengthen its focus on non-financial risks for banks, insurers and pension funds.
The regulator updated its model for assessing risks due to the emergence and prominence of other prudential risks, such as failures of corporate governance, accountability, culture, remuneration and cybersecurity, it said.
The new "risk and intensity" system will replace the "probability and impact of failure" models the Australian Prudential (LON:PRU) Regulation Authority (APRA) has used since 2002, it said in a letter to banks, insurers and funds.
"The new model ... and its design features ensure greater elevation of non-financial risks whilst preserving the importance of financial resilience," the regulator said in the letter.
An entity's score will put it within a five-stage system of supervisory intensity, the regulator said. Stage 1 will require "routine" supervision, and ramp up from there.
The regulator said entities would be advised of their new risk ratings following the new assessment, conducted on a confidential basis. Adoption of the new system is expected to be completed by June 2021.