APRA has branded as a myth the long-held belief that large superannuation funds are in less danger of failure than smaller funds. The regulator says large funds have a risk of failure equal to their smaller counterparts, and they’re in for a shake-up like the general insurance industry has just experienced.

Charles Littrell, EGM of the Policy Research and Consulting Division, said last week that because most fund failures to date have involved smaller entities, a myth has developed that risk is a characteristic of the smaller end of the market.

“This regrettably is not the case,” he said. “Big super funds are not exempt from risk any more than big insurance companies or big banks are exempt from risk.”

And he confirmed that the days of easy regulatory relationships are over, noting that  “a cultural change towards more proactive regulation of large entities” is on the agenda. “We are becoming more inclined to intervene earlier and more forcefully with larger entities,” he said.

He said it’s not uncommon for APRA to have, at any one time, about 20 larger funds rated high risk or extreme risk. “Some of these funds would hold several hundred million dollars in assets, in some cases into the billions,” he said.

“APRA is mainly concerned with the risks associated with incompetence and inattention, mostly associated with poor investment decisions and poor operational risk management. We also address the blessedly rare cases of criminality,” he added.    

Mr Littrell said APRA is “gearing up” to undertake superannuation industry reforms similar to those performed on the general insurance industry.