The Australian Prudential Regulation Authority (APRA) has committed to address shortcomings in its management of superannuation identified in a report by the Financial Regulator Assessment Authority (FRAA). 

The review says comparing APRA’s regulation of superannuation with its regulation of banking and insurance, APRA needs to enhance its regulation of superannuation to be more risk based, forward looking and outcomes focused, particularly at the systemic level. 

While the FRAA review acknowledged the strengths of APRA, finding its supervision function within superannuation to be “generally effective and capable” the resolution function was described as “significantly less developed”. 

Five recommendations call for an increase in efforts to identify and understand risks in superannuation, enhancing its staffing and data and technology capabilities, improve transparency and timeliness in its communications, and develop APRA’s resolution capability in superannuation. Risks could be cyber security and fraud. 

FRAA says APRA should recruit, train, retain and develop its staff to build appropriate skills and industry knowledge, to drive deeper understanding and build stronger capability to manage and respond to emerging and systemic risks. 

FRAA recommended APRA provide trustees with annual plans of proposed supervisory activity. APRA should keep trustees informed of the status of reviews, information requests and other supervisory activities.  

It also says APRA should prioritise developing its resolution capability and work closely with industry to lift awareness of recovery and resolution planning requirements to ensure APRA is able to support recovery and exit, and resolve failing superannuation trustees.  

APRA Chair John Lonsdale says APRA welcomes the FRAA’s review of its superannuation capabilities, promising to drive a step-change in superannuation recovery and resolution planning, consistent with its new prudential standards. 

“APRA will continue to build on its strong foundation of safeguarding the financial wellbeing of the Australian community by further strengthening prudential frameworks and improving capability to drive better industry practices in superannuation for the benefit of members.” 

The Federal Government welcomed the report tabled by Assistant Treasurer and Minister for Financial Services Stephen Jones. 

“As Australia’s prudential regulator, APRA plays a key role in ensuring Australia has a safe and stable financial system. APRA has supported the Australian economy through its regulation of the banking, insurance, and superannuation industries during the complex challenges of recent years,” the government said. 

The FRAA report is available here.