Issue 881, 6 December 2022
In this issue:
Recovery and exit planning: prudential standard finalised
APRA has finalised its prudential standard CPS 190 Recovery and exit planning, aimed at reinforcing the resilience of the financial system.
The new standard aims to ensure APRA-regulated entities are better prepared to manage periods of severe financial stress.
CPS 190 will come into effect from 1 January 2024 for banks and insurers, and from 1 January 2025 for registrable superannuation entity (RSE) licensees. APRA has indicated the longer timeframe for RSE licensees “supports these entities in responding to other related reforms for the sector, including the recently released consultations on draft requirements for superannuation transfer planning and financial resources for risk events in superannuation. These complementary reforms further reinforce the objectives of CPS 190, by supporting prudent transfers of members and access to financial resources in a range of risk events.”
APRA has published a letter outlining its response to the feedback received during consultation on a draft of CPS 190 (see ASFA Action issue 836, draft CPS 190 was then titled Financial contingency planning). APRA notes that the standard has been finalised without material revision to the draft proposals.
APRA has also recently consulted on draft guidance to accompany CPS 190 – see ASFA Action issue 868 for background.
Direction for data collections: APRA response to consultation
APRA has released its response to a consultation earlier this year on its direction for data collections.
APRA’s consultation paper set out a five-year roadmap for transforming its approach to collecting financial industry data from its regulated entities (see ASFA Action issue 849 for background).
APRA’s response to issues raised during its consultation includes a commitment to:
- provide more detailed roadmaps for the intended design and implementation of new collections for each industry
- work with industry to develop a targeted framework that supports data quality outcomes for more granular collections
- continue working with all industries through strategic and technical working groups to support planning, design, and implementation of the future collection roadmaps, and taking a co-design approach to the design of collections.
APRA Deputy Chair Helen Rowell said: “The proposed shift to more granular collections will enable APRA and all other stakeholders to benefit from deeper insights, while ultimately reducing the burden for industry. Our data collections roadmap is ambitious and will require significant investment from industry to achieve this transformation over the next five years.”
Bills update
Parliament has concluded its sittings for 2022 and will not sit again until 6 February.
There were some major developments late last week in relation to the Financial Accountability Regime (FAR) and the Compensation Scheme of Last Resort (CSLR):
- On Thursday night, in the Senate, the Government amended the Financial Sector Reform Bill 2022 to remove amendments related to the FAR and CSLR, leaving only reforms in relation to consumer credit and leases
- The Bill, as amended, was passed by the House of Representatives on Friday morning
- Supplementary explanatory memoranda in relation to the amendments indicate that the FAR and CSLR measures were removed from the Bill to enable the Government to consult further on the FAR-related amendments and the implementation of the CSLR without hindering the progression of other measures in the Bill
- The Financial Accountability Regime Bill 2022, Financial Services Compensation Scheme of Last Resort Levy Bill 2022 and Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2022, which deal solely with FAR and the CSLR, remain before the Parliament (see ASFA Action issue 868 for background). However, before either reform can progress it will be necessary for the Government to reintroduce, in a new Bill and potentially in an amended form, the substantive amendments that were removed from the Financial Sector Reform Bill 2022.
In addition to the Bills noted above in relation to the FAR and the CSLR, two further Bills relevant to superannuation remained before Parliament when it rose:
- Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 – this Bill has now been passed by the House of Representatives and remains before the Senate. The Bill contains:
- amendments (in Schedule 6) to extend the current financial reporting and auditing requirements on registrable superannuation entities, to align them with those that apply to public companies. See ASFA Action issue 880 for background
- amendments (in Schedule 9) to the tax treatment of certain defined benefit pensions, to address issues arising from the 2020 decision of the Full Federal Court in Commissioner of Taxation v Douglas. See ASFA Action issue 880 for background.
Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022 – this Bill remains before the House of Representatives. The Bill contains amendments addressing a diverse range of measures, including in relation to modernising business communications, implementing recommendations from the Australian Law Reform Commission’s Interim Report A from its review of the financial services legislative framework, and miscellaneous amendments to the Superannuation Industry (Supervision) Act 1993. See ASFA Action issue 880 for background.
A further three relevant Bills that have been passed by Parliament (see ASFA Action issue 880) are still awaiting Royal Assent:
- Treasury Laws Amendment (2022 Measures No 2) Bill 2022 – this Bill reduces the eligibility for downsizer contributions from 60 to 55 years. See ASFA Action issue 880 for background
- Privacy Legislation Amendment (Enforcement and Other Measures) Bill 2022 – this Bill increases the maximum penalties for serious or repeated privacy breaches and provides for enhancements to the enforcement powers of the Australian Information Commissioner and the information sharing powers of the Commissioner and the Australian Communications and Media Authority. See ASFA Action issue 876 for background
- Crimes Amendment (Penalty Unit) Bill 2022 – this Bill increases the amount of a Commonwealth penalty unit from $222 to $275. See ASFA Action issue 878 for background.
The Treasury Laws Amendment (2022 Measures No 3) Act 2022 received Royal Assent on 5 December. As reported in ASFA Action issue 880, while this initially included a modification to the Your Future, Your Super performance test for faith-based products, this was removed prior to passage of the Bill by Parliament. The Act does not include any measures relevant to superannuation.
Updated prudential standards: audit, derivatives
APRA has formally determined two updated prudential standards relevant to superannuation:
- Audit and related matters: Superannuation (prudential standard) determination No. 4 of 2022 revokes the existing version of SPS 310 Audit and related matters and replaces it with a new version that will commence on 30 June 2023. It sets out, in the attachment to SPS 310, an updated schedule of the reporting standards that must be addressed in a registrable superannuation entity (RSE) auditor’s report for the year under review. The amendments to SPS 310 remove audit requirements for revoked reporting standards and specify the content of selected new reporting standards, including whether reasonable assurance audit, or limited assurance review, is required in respect of the reporting standard. APRA has also amended provisions of SPS 310, relating to the exercise of APRA’s discretion under the standard to ensure consistency with equivalent provisions in other recently updated prudential standards. APRA had previously undertaken consultation on the update to SPS 310 between December 2021 and March this year, before indicating in June that it would delay the commencement of any amendments to the financial year ending 30 June 2023 (see ASFA Action issues 855 and 837)
- Derivatives: Banking, Insurance, Life Insurance and Superannuation (prudential standard) determination No. 2 of 2022 revokes the existing version of CPS 226 Margining and risk mitigation for non-centrally cleared derivatives and replaces it with a new version that takes effect on 1 January 2023. The updated version makes consequential amendments to ensure consistency of APRA’s broader prudential framework with new capital standards applied to authorised deposit-taking institutions.
Annual members’ meeting notice regulations: disallowance motion deferred
As reported in ASFA Action issue 880, Independent Senator Jacqui Lambie had given notice that she would, on 30 November, move a motion to disallow the Superannuation Industry (Supervision) Amendment (Annual Members’ Meetings Notices) Regulations 2022. The regulations amend the disclosure requirements for registrable superannuation entities’ annual members’ meeting notices.
Senator Lambie’s disallowance motion was deferred until 6 February, when Parliament resumes.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
