APRA rebuffs ISA on fund governance
In what represents a solid rebuff to Industry Super Australia (ISA) the Australian Prudential Regulation Authority (APRA) has fully backed the Government's move to impose at least one-third independent directors on superannuation fund boards, including an independent chairman.
What is more, APRA chose an industry funds forum — the Australian Institute of Superannuation Trustees (AIST) Governance Ideas Exchange — to make its views entirely clear.
APRA member, Helen Rowell, used an address to the forum to rebuff ISA claims that the Government's governance changes would be detrimental, arguing that the existing equal representation regime had become less appropriate as industry superannuation funds had become public offer and their assets had grown to rival those of the major banks.
"The superannuation industry has come a long way in the last 22 years. The superannuation guarantee arrangements are well and truly embedded and there has been a dramatic reduction in the number of corporate funds, which are now very much the minority," Rowell said.
Further she pointed out that over 80 per cent of the assets of APRA-regulated superannuation funds were in public offer funds with a broad membership base and multiple (and in many cases hundreds or thousands of) employers contributing to the funds.
"The industry's significance, from both a financial system and retirement income policy perspective, continues to increase. Indeed, the size of the industry and individual funds within it has increased significantly in recent years, with more and more funds having total assets comparable to larger deposit taking institutions (ADIs) and insurers," she said.
Rowell said the boards of all ADIs and general and life insurers had been required by APRA's prudential standards to have a majority of independent directors and an independent chairperson since 2006.
"And this applies — and, I might add, works well — even when the regulated entities are mutually-owned and not-for-profit," she said.
"APRA's view is that, given the size, nature, and increasing complexity of the industry, it is appropriate for the governance requirements for the superannuation industry to be more closely aligned with those that apply to banking and insurance. After all, the industry is now an increasingly critical component of the Australian financial system."
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