Australian Prudential Regulation Authority (APRA) deputy chair Ross Jones has defended his organisation's increased powers, claiming APRA currently has more power to regulate a small regional credit union than a multi-billion-dollar superannuation fund.
Speaking at the Association of Superannuation Funds of Australia conference in Brisbane, Jones said the APRA prudential standards would bring the regulation of the superannuation industry in line with the banking and insurance sectors.
He added that constant dialogue between the industry and APRA would ensure a smooth transition to the new regulatory environment.
Responding to feedback from the industry about the draft prudential standards, Jones said the level of operational risk reserves required to be held by funds would not be mandated – instead, it was up to individual funds to determine the right level. However, he added that APRA would be issuing guidance recommending 25 basis points as an ideal starting point.
APRA would also be setting new requirements for trustee governance, Jones said.
"Heightened obligations will encourage transparency, ensure that duties are discharged effectively and focus greater attention on related areas of concern such as remuneration and investments," he said.
When it came to risk management and scale efficiencies, Jones allayed industry concern that APRA would be favouring one business model over another.
"APRA does not have a magic number in mind for the optimal size of a superannuation fund. Trustees may achieve scale efficiencies by having a large fund, or may access scale efficiencies by investing in pooled investments and using large service providers with scale," he said.
The most important thing, he said, was that trustees assessed for themselves whether their MySuper products had sufficient scale efficiencies to be in the best financial interests of beneficiaries.
He also recommended that trustees planning to offer a MySuper product contact their APRA representative and fill out a draft application.
