ASIC and APRA levies driving consolidation

Further proof has emerged that it is not only financial advisers who are concerned that their diminishing numbers mean they are individually having to pay more to fund financial services regulation – the small superannuation funds and small banks think so too.

While financial advice licensees have pointed to the manner in which fewer advisers have to fund the Australian Securities and Investments Commission (ASIC) levy, recently released submissions to the Treasury’s consultation around the levies paid to fund the Australian Prudential Regulation Authority (APRA) have revealed similar concerns.

Major accounting group, CPA Australia told the Treasury the Financial Institutions Supervisory Levy (FISL) would see smaller funds paying up to 12 times the amount of larger funds, while the Customer Owned Banking Association (COBA) has warned the levy will have a “disproportionate’ impact on smaller banks.

At the same time, the Association of Superannuation Funds of Australia (ASFA) lamented that superannuation funds would from next year not only have to ante up to pay the APRA levy but also the ASIC levy.

The COBA submission said that it “remains concerned that the APRA levy model continues to be contentious due to its innate ability to create unpredictable distributive outcomes when APRA’s funding requirements change”.

“Although the FISL has decreased for ADIs in FY24, any future increase in APRA’s funding requirements will see the industry pay more in levies however the existing model does not guarantee that any such increases will be equitably distributed among supervised entities.”

“A future increase in restricted APRA levies without a corresponding increase in the maximum restricted levy can have a disproportionate impact on smaller ADIs – as a result, a disproportionate amount of the increased levy is borne by entities subject to the restricted rate (i.e. those not paying the minimum or maximum restricted levies). In Australia, this is everyone but the market-dominating largest four or five banks and the smallest ADIs,” the COBA said.

For its part, CPA Australia said that while it acknowledged the Government’s current policy to encourage mergers and reduce fees for superannuation fund members, it believed “the cost imposed on members of small funds in the interim is disproportionately burdensome when considering factors other than member account balances”.

“Therefore, we recommend exploring ways to ensure that small funds are not disproportionately charged, such as capping the levies to the fund based on per member or FUM percentage costs, removing the minimum charge from the restricted component, or introducing a new tier for small funds in the large APRA-regulated fund category.”

The concerns around the impact of the APRA levy come against the background of the Financial Advice Association of Australia and other entities last month expressing concern at the level of increase in the ASIC levy.
The FAAA pointed out that the increase for the current financial year represented an almost tripling in costs.