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APRA foresees super funds overtaking banks

Mike Taylor27 March 2024
white queen dominates

Australia’s major superannuation funds can expect to be the subject of the same sort of regulatory stress-testing imposed on banks, with the Australian Prudential Regulation Authority (APRA) pointing to the super sector being on track to overtake the banking sector.

Flagging APRA’s plans for a system-wide stress test of the Australian financial system, APRA chair, John Lonsdale noted that while the banking industry remained the cornerstone of the Australian financial system, it was being increasingly challenged by superannuation.

“Over the past decade, the value of assets managed by the superannuation sector has grown at almost double the rate of banking – 8.8% a year compared to 4.8%,” he said. “If this trend continues superannuation assets will exceed the size of the banking sector time.”

“To be clear, superannuation doesn’t need to be bigger to have an influence over financial stability,” Lonsdale said.

The APRA chair pointed to the interconnectedness of the Australian financial system as a justification for the prudential regulator stress testing the broader financial system.

“The intention behind the new test is to sharpen APRA’s response to systemic risks by deepening our understanding of the transmission mechanisms of shocks across the financial system,” he said.

“We hope to gain insight into the impacts of spill over and amplification risks between industries and identify possible ‘blind spots’ in our supervisory regime. Learnings from the process would also inform our future stress testing program, including similar future exploratory and industry-specific exercises.”

Earlier in his address to a banking forum in Sydney Lonsdale pointed to the interconnectedness of the financial system being exhibited by commercial property stating – “banks lend to it, super funds invest in it and insurers underwrite it”.

“Many workers, however, despite their employers’ best efforts, don’t want to use it as much as they once did and would prefer to work partly or fully from home,” Lonsdale said.

“Should we see a major correction in commercial property valuations, all three industries – banking, super and insurance – would be impacted.”

“Climate risk is another inter-related area. The declining affordability and accessibility of property insurance in many parts of Australia, for example, isn’t only bad news for those communities. It also impacts the ability of households and businesses to get credit, to rebuild after a disaster or to repay loans, and might also impact super though requests for early releases on compassionate grounds.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Corrupt Canberra
20 days ago

Aren’t Industry Super so clever, ask Swannie and their Commercial Property hasn’t lost any value.
Industry Supers Unlisted Assets are more like Magic Puddings, only ever going up.

ASIC & APRA are so Regulatory Capture Corrupted to Industry Super they allow these Magic Puddings.

Big Barry
20 days ago

Values can’t come down if you don’t value them in down markets or we pick the valuer we pay lots of money too mate. We learnt this from the banks which did this with rating agencies which helped cause the Global financial crisis. Oh don’t worry about the regulators all our old union mates work there too.

Ps one of the biggest industry funds Australian super is the default fund, which explains why we don’t find misconduct and when we do we fine them small amounts or make just make the members pay the fine.

Option 2 back to our favorite just blame the financial advisers, they can pay via CSLR because they should have known that financial product was going to fail, or we can just claim the adviser put them in a risky product! don’t worry about the fact all investment carries some level of risk we can just keep blaming them say it was too much risk, don’t worry about risk profiles signed off the client discussion notes the SOA the review appointments for years on end the client didn’t know how much “risk” they were taking.