The Australian Prudential Regulation Authority (APRA) has released for consultation its proposed revisions to Prudential Standard SPS 530 Investment Governance (SPS 530).

SPS 530 aims to ensure registrable superannuation entity licensees meet their obligations to prudently select, manage and monitor investments.

The proposed revisions to SPS 530 respond to findings from APRA’s unlisted asset valuation thematic review and APRA’s 2018-2019 post-implementation review (PIR) of the superannuation prudential framework. The updates focus on enhancements to stress testing, valuation and liquidity management practices.

Draft SPS 530 proposes that an RSE licensee’s comprehensive stress testing program must be completed at least annually, and include at a minimum:

• detail on the roles and responsibilities of persons involved in the design, implementation, review, reporting and oversight of stress testing;
• articulation of the methodology, objectives, assumptions used and frequency of stress testing, as well as the review of the metrics and methodology employed;
• identification of circumstances that may lead to the need for ad hoc stress testing, including triggers; and
• processes to ensure the data used in stress testing is reliable.

Draft SPS 530 also proposes that an RSE licensee’s liquidity management plan must:

• identify personnel responsible for the management and oversight of liquidity risk;
• include liquidity stress testing as part of their comprehensive stress testing program; and
• outline key metrics to be reported to and periodically reviewed by the Board, relevant board committees and senior management.

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