ASFA brands APRA alarmist

TheAssociation of Superannuation Funds of Australia’s(ASFA) chief executive Philippa Smith says theAustralian Prudential Regulation Authority’s(APRA) claims recently that five large super funds under its charge experienced payment failures are exaggerated.

Smith was responding to a speech given by APRA’s executive general manager of policy, research and consulting, Charles Littrell to ASFA’s New South Wales Chapter in Sydney yesterday.

Littrell told the Chapter that large superannuation funds are just as likely as small funds to experience prudential problems and subsequent APRA involvement.

“A myth has sprung up that superannuation risk is concentrated in small funds. This is regrettably not the case…Just in the last few weeks, for example, we have asked an approved trustee to hand in its licence, and we may make the same request to another approved trustee shortly,” Littrell said.

He added that APRA came close to litigating against a corporate super fund before the fund decided to address APRA’s concerns.

Littrell also said that problems with large super funds that have caught the attention of the regulator included those that had involved fraud, and significantly, these were in multi-billion dollar funds. But so far, these have not resulted in losses to members or adverse publicity. However, he could not guarantee that this record could be maintained in the future.

“It would not be unusual for APRA to have at any one time about 20 funds with more than $10 million in assets rated high or extreme risk,” he said.

Philippa Smith’s reply to these claims is to say that APRA is exaggerating the severity of the cases.

“If our understanding is correct, the corporate fund involved at least $600 million, but related to a defined benefit funding issue. At no time was there any suggestion that any capital was at risk,” Smith says.

And as for the trustees urged to hand in its license, Smith took a swipe at APRA’s slowness to deal with it as it was notified to the regulator’s attention more than a year ago.

“We welcome APRA’s commitment to be more proactive and focus on the four themes identified, but there seems to be some rewriting of history and exaggeration as to the extent of the problem. Some alarmist reporting has resulted,” she says.

The four themes Smith refers to as what Littrell had referred to in his speech as special areas of focus for the regulator are risk management, investment management, outsourcing and excluding unfit and improper people from responsible positions on a super fund.