3.3 Who should regulate?

One response to doubts or difficulties about the respective roles of APRA and ASIC in connection with superannuation would be to create a new and separate regulator responsible for all aspects of supervision and regulation of the superannuation industry. The size, complexity and importance of the industry may all be said to point towards that kind of step. But the superannuation industry has so many intersections with other parts of the financial services industry that creation of a new and separate regulatory authority is likely to create more problems than it would solve.

Superannuation entities are becoming very important participants in Australia’s capital markets. There is, I believe, much force in APRA’s submission that ‘[a] superannuation-only regulator would be unlikely to have a broad perspective on risks and linkages within the broader financial sector, which will become increasingly important as RSE Licensees consolidate, become more complex, and engage in more sophisticated activities such as direct lending and the provision of retirement products’.[1] As ASIC submitted, the ‘superannuation system has evolved and is now at a level of maturity where accountability must be a key focus’.[2]

Creation of a separate regulator for superannuation would mark a shift back towards the sectoral model of regulation that prevailed before, and was not favoured by, the Wallis Inquiry. In itself this would not be reason enough to reject the idea, but it is good reason to think carefully before adopting it. As Treasury pointed out in its submissions, the new regulator would have to deal with prudential and conduct issues and would almost certainly take its initial cohort of staff from APRA and ASIC, thereby diminishing their resources.[3] And, of course, there would inevitably be a period of transition between the old and new regulatory arrangements.[4]

I do not favour the creation of a superannuationonly regulator. The twin peaks model of regulation should be maintained. Instead, I consider that the roles of APRA and ASIC in relation to superannuation should be adjusted.

[1] APRA, Module 5 Policy Submission, 9 [19].

[2] ASIC, Module 5 Policy Submission, 1 [5].

[3] Treasury, Module 5 Policy Submission, 33 [158].

[4] Treasury, Module 5 Policy Submission, 33 [159].