The Stronger Super reforms aren’t aimed at pushing out smaller funds, says Ross Jones, deputy chairman of the Australian Prudential Regulation Authority (APRA). Speaking on a panel with the commissioner of the Australian Securities and Investments Commission (ASIC), Greg Tanzer, Jones responded to concerns about the impact of reform on smaller funds.
“The issue with scale is all about poor performance… [if] you are a long-term poor performer… using the scale test, APRA supervisors will be asking you, ‘Is your very poor performance linked to scale?’ In other words, are you too small?”
Jones said if funds’ poor performance is linked to scale, APRA will be encouraging funds to either “merge or get out or do something”. But the size of the fund is irrelevant if it’s a strong performer.
“If you are a very, very poor performer and, this is over the long term… then watch out. It’s the same thing we do with other small institutions.”
Jones denied that consolidation was a motivator for the regulator, but argued it’s not unreasonable that it’s occurring.
“Compared to most other parts of the financial sector, of course, it’s still very unconcentrated… so I think you will find increasing consolidation.”
On the question of large funds not performing, Jones said the issue is the same, and greater disclosure requirements will mean there’s more focus on performance.
Meanwhile, elsewhere on the reform front, Jones said the number of MySuper applications have fallen short of the regulator’s expectations, but the quality of applications so far has been good. The number of applications to date sit at around 40, but, he said, there have been a few non-permanent application withdrawals.
“When we did our first sort of run-around with industry, it was suggested that there may be around 250 MySuper applications. When we had a second conversation with the regulated sector, it dropped down to around 150. We’re now talking about 120.”
Jones said he’s concerned that some super funds are yet to decide whether they will apply for a MySuper licence.
“I would suggest that if you are contemplating a MySuper application and you haven’t given it serious thought yet, you’re going to have a lot of difficulty in meeting the deadlines.”
|Day 1 newsletter from CMSF 2013|