Banks will feature alongside superannuation funds when APRA conducts a financial system-wide stress test in 2025, APRA executive director Carmen Beverley-Smith told an industry conference yesterday.

The system-wide stress test will include participation by banks and large super funds “that have significant holdings in bank debt and equity instruments and in bank deposits” Beverley-Smith said.

“With one of the largest superannuation pools in the world, the industry is a leading investor in our local financial markets, and a significant investor offshore as well” she told the annual ASFA conference. 

“As a result, the industry is increasingly connected with global and Australian financial systems, and especially our banks. Super funds own more than a quarter of bank shares and a third of short-term bank debt in Australia.

“As the super industry becomes a larger and more important part of the financial system, it is essential that we have a strong understanding of what the increased interconnections between superannuation and banking would mean in the event of a system-wide shock.”

While the design of the system test is yet to be finalised, “it is likely to be somewhat different to the bank and insurance industry stress tests we normally conduct” she said. 

“It will be less about the individual outcomes for participating entities and more about exploring the potential risks that might arise across the system in times of stress. 

“Superannuation will feature in the stress test because we want to better understand the potential impact of a super industry under stress in a system-wide shock scenario, including the sources of risk that might emerge and transmit across the financial system. 

“It is an opportunity for APRA to learn how we can further enhance the strength and resilience of our interconnected system to withstand future shocks. You will hear more from us on this over the coming months.”