charles littrell executive general manager australian prudential regulation authority 28 may 03
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AUSTRALIAN SUPERANNUATION SUMMIT “Progress Towards a Sounder Superannuation Industry”. Charles Littrell Executive General Manager Australian Prudential Regulation Authority 28 May 03. APRA’s Mission. Minimise Regulated Entity Failure to pay protected creditors - PowerPoint PPT PresentationTRANSCRIPT
AUSTRALIANAUSTRALIANSUPERANNUATION SUMMITSUPERANNUATION SUMMIT
“Progress Towards a Sounder “Progress Towards a Sounder Superannuation Industry”Superannuation Industry”
Charles LittrellCharles Littrell
Executive General ManagerExecutive General Manager
Australian Prudential Regulation AuthorityAustralian Prudential Regulation Authority
28 May 0328 May 03
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• Minimise Regulated Entity Failure to pay protected creditors
• Super fund members, Depositors, Policyholders
• Collectively, “Beneficiaries”• Not Shareholders
APRA’s MissionAPRA’s Mission
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• Failures are statistically certain• Zero Systemic Failures• 99.9% PER, 99.95% MPR• Competitiveness, Efficiency, Innovation,
Contestability• Budget, Use of State Power
Defining the MissionDefining the Mission
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• Defined Benefit: Protect Promised Payments
• Accumulation: “Reasonable” Outcome• All Funds: Appropriate Trustee Behaviour• Bad Luck vs. Bad Trustees
APRA’s Mission in APRA’s Mission in SuperannuationSuperannuation
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• SIS and Other Statutes: Minimum Standard• Handling Risk: Core Standard
– Current Good Practice– Future Licensing Key
• Handling Conflicts: Increasingly a core standard─ Vs. Employers– Vs. Union– Vs. Retail Sponsor– Fund Members are Not Customers!
Appropriate Trustee Appropriate Trustee BehaviourBehaviour
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• Becoming “Better”• Becoming “Tougher”• Supporting Government Reform• Data, Analysis, Research
Major APRA Major APRA Superannuation Superannuation InitiativesInitiatives
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PROBABILITY RATING
IMPACT RATING
LOW MEDIUM HIGH EXTREME
Extreme
High
Medium
Low
250250 37503750 1875018750 5625056250
5050 750750
151511
225022507507501501501010
112501125037503750
7575 225225 4
Becoming Better: Becoming Better: Consistent Risk Consistent Risk AssessmentAssessment
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Becoming Tougher: Becoming Tougher: Consistent Supervisory Consistent Supervisory ResponseResponse
LOW
LOW
MEDIUM
HIGH
MEDIUM
HIGH
EXTREME
EEXXTTRREEMMEE
NORMAL
OVERSIGHT
MANDATED
IMPROVEMENT
RESTRUCTURE
RESTRUCTURE
LLAARRGGEE
NORMAL
OVERSIGHT
MANDATED
IMPROVEMENT
RESTRUCTURE
MMEEDDIIUUMM
NORMAL
NORMAL
OVERSIGHT
MANDATED
IMPROVEMENT
RESTRUCTURE
LLOOWW
NORMAL
NORMAL
MANDATED
IMPROVEMENT
RESTRUCTURE
IMPACT
RISKRISK
II
MM
PP
AA
CC
TT
9
• Trustee Licensing, Fund Registration• Risk Management Strategies and Plans
– Fraud/Criminality– Investment– Operational/Outsourcing– Governance/Conflicts
• Key Licensing Issues– Sound Risk Management Policies– Followed in Practice– Proven to APRA– Tiered vs. Complexity, Equal
Representation
Supporting Supporting Government Government Prudential ReformPrudential Reform
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• Data Improvements from June 2004• Analysis and Research
– Prudential Focus– Outlier Analysis– Size/Sector Research– Cost Research– Detailed Onsite Analysis
• Research Direction– Understanding Industry Economics– Developing Early Warning Signals– Information Pressure on Poor Conflict Management
Superannuation Data, Superannuation Data, Analysis, and Analysis, and ResearchResearch
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• Licensing and Risk Management the Core Tools• More performance/data focus vs. statutory focus• More interventionist• Continued focus on misconduct• Increased focus on conflict of interest
APRA Directions in APRA Directions in SuperannuationSuperannuation
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• Reasonably safe from misconduct• Not necessarily safe from conflict• Licensing will help in both areas• New APRA approach will also help
SummarySummary
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AUSTRALIANAUSTRALIANSUPERANNUATION SUMMITSUPERANNUATION SUMMIT
“Progress Towards a Sounder “Progress Towards a Sounder Superannuation Industry”Superannuation Industry”
Charles LittrellCharles Littrell
Executive General ManagerExecutive General Manager
Australian Prudential Regulation AuthorityAustralian Prudential Regulation Authority
28 May 0328 May 03