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Charles Littrell Executive General Manager Australian Prudential Regulation Authority 28 May 03

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

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Charles Littrell Executive General Manager Australian Prudential Regulation Authority 28 May 03

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  1. AUSTRALIANSUPERANNUATION SUMMIT“Progress Towards a Sounder Superannuation Industry” Charles Littrell Executive General Manager Australian Prudential Regulation Authority 28 May 03

  2. APRA’s Mission • Minimise Regulated Entity Failure to pay protected creditors • Super fund members, Depositors, Policyholders • Collectively, “Beneficiaries” • Not Shareholders

  3. Defining the Mission • Failures are statistically certain • Zero Systemic Failures • 99.9% PER, 99.95% MPR • Competitiveness, Efficiency, Innovation, Contestability • Budget, Use of State Power

  4. APRA’s Mission in Superannuation • Defined Benefit: Protect Promised Payments • Accumulation: “Reasonable” Outcome • All Funds: Appropriate Trustee Behaviour • Bad Luck vs. Bad Trustees

  5. Appropriate Trustee Behaviour • 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!

  6. Major APRA Superannuation Initiatives • Becoming “Better” • Becoming “Tougher” • Supporting Government Reform • Data, Analysis, Research

  7. Becoming Better: Consistent Risk Assessment 3750 18750 56250 250 50 3750 11250 750 10 2250 150 750 4 1 15 75 225

  8. Becoming Tougher: Consistent Supervisory Response RISK I M P A C T

  9. Supporting Government Prudential Reform • 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

  10. Superannuation Data, Analysis, and Research • 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

  11. APRA Directions in Superannuation • 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

  12. Summary • Reasonably safe from misconduct • Not necessarily safe from conflict • Licensing will help in both areas • New APRA approach will also help

  13. Charles Littrell Executive General Manager Australian Prudential Regulation Authority 28 May 03 AUSTRALIANSUPERANNUATION SUMMIT“Progress Towards a Sounder Superannuation Industry”

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