The Australian Prudential Regulation Authority (APRA) has proposed changes to improve how superannuation trustees manage financial resources to protect fund members from poor operational risk event outcomes.

APRA’s discussion paper proposes to replace the existing Prudential Standard SPS 114 Operational Risk Financial Requirement (SPS 114) with enhanced obligations for trustees.

SPS 114 requires RSE licensees to set aside financial resources to make good any losses to members caused by operational risk events.

APRA intends to replace the existing SPS 114 with a two-tiered model, consisting of:

• a baseline component, to ensure ready access to financial resources to fund recovery or
  exit activity; and
• an operational risk component, to spread the impact of operational risk fairly across different cohorts of members. The operational risk component will largely reflect the approach of the existing operational risk financial requirement but with greater flexibility.

The enhanced requirements seek to widen the scope of permitted use, adopt a more sophisticated risk-based approach to determining how much to hold and reducing barriers to efficient use.

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