The Australian Prudential Regulation Authority (APRA) will not dictate how superannuation funds calculate the capital required to offset any potential losses from operational risks.
Although APRA has mentioned that in other industries the level of capital required to be held for operational risk is set at 0.25 per cent of funds under management (FUM), APRA supervisory support division general manager Greg Brunner said the prudential regulator would not enforce that level.
"The 0.25 per cent is out there. It is a number that we will be looking at as a benchmark in sitting down with people and having discussions," Brunner said in a Finsia presentation yesterday.
"[But] there might be a very good reason why people have a different level and we are certainly happy to have discussion about that.
"We're leaving it to them to determine the size of the operational risk financial requirement."
The operational risk financial requirement is part of the proposed prudential standards for superannuation funds, but the relevant standard does not mention the 0.25 per cent.
"It doesn't mention it because it is the start of a conversation," Brunner said.
He indicated funds had three years to develop and implement a proper operational risk financial requirement framework, but said many funds already had a facility in place.
"The statistics aren't very clear on this, but we do know that money has been set aside," he said.
"Some of it is sitting in reserves."
The financial requirements should be part of a wider risk framework, he said, and that framework would differ from fund to fund.
"The amount is to be determined by the RSE (registrable superannuation entity), so there isn't a formula there that APRA is establishing for determining your operational risk financial requirement," he said.
"It is not like the banking sector where there are strict rules set by Basel III.
"We are leaving it to funds themselves to develop the methodology for the operational risk financial requirement."
