Impact of proposed APRA prudential standards
The introduction of new prudential standards will require trustees to revise current policies and create new policies in order to meet APRA’s requirements. Being proactive now is key to ensuring that trustees do not find themselves short on time and resources.
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Overview As part of the Stronger Super reforms, APRA’s powers in relation to superannuation funds have been extended to setting prudential standards. On 28 September 2011, APRA released APRA Discussion Paper: Prudential Standards for Superannuation outlining each of the prudential standards and accompanying prudential practice guides it proposes to introduce. The prudential standards are expected to take effect from 2013, in a period of other major changes impacting the super industry, including MySuper and the Shorter PDS Regime. Effective planning now is key to ensuring that in 2013, trustees do not find themselves short on time and resources.What Action Can Be Taken Now? Each trustee should be asking the following questions:
The introduction of the new prudential standards will require most trustees to revise current policies, and create new policies, in order to meet APRA’s requirements. A high level Gap Analysis is an excellent way to provide a trustee board with an indication of the extent to which their current policies and procedures meet the requirements of the proposed prudential standards. This analysis should include a recommendation as to where resources should be focused in order to best respond to the requirements of the new regime. The enforceable nature of the proposed prudential standards is also likely to require most trustees to strengthen their current compliance monitoring and reporting frameworks. Background The extended power granted to APRA in relation to superannuation funds complements the powers APRA holds in relation to the other industries it regulates, including banks, and general and life insurance companies. APRA intends to cover topics common to other APRA-regulated industries, as well as superannuation specific topics:
Timing Draft prudential standards and accompanying forms and instructions are expected to be released for industry consultation in early 2012, and finalised by the end of the year. Despite the new prudential regime being in its early stages of development, APRA has provided sufficient information for trustees to start thinking about the impact the prudential standards will have on the governance and operation of their fund. As the timeframe for implementation overlaps with the introduction of MySuper and the Shorter PDS Regime, it is important that trustees commence their planning now to avoid timing and resourcing issues later on. Given the lead-in time to the commencement of the prudential standards, trustees should also take this opportunity to investigate the variety of products available to assist them to streamline their compliance monitoring and reporting frameworks and use their resources more efficiently.
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