How Will Basel 3 and associated regulatory change impact the investment strategies of superannuation funds? Brad Carr Director, Superannuation Funds National.

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Presentation transcript:

How Will Basel 3 and associated regulatory change impact the investment strategies of superannuation funds? Brad Carr Director, Superannuation Funds National Australia Bank 18 th Melbourne Money & Finance Conference 1 & 2 July 2013

 Regulatory change in banking affects investors, including superannuation funds  Fundamental shift away from ‘maturity transformation’, and instead towards ‘matched funding’  Key delineations among bank depositors, between:  ‘Financial Institutions’, including superannuation funds  ‘Corporates’ and ‘Public Sector Entities’  ‘Retail’ and ‘SME’ customers (including self-managed superannuation funds)  Not all aspects of the regulatory changes are finalised, and views and conclusions are indicative only - but it is important to develop an understanding on impacts and timing, and assess their future investment and liquidity profiles in light of this 2 Basel 3 and Australian Superannuation Funds

Trends in Term Deposit Rates Source: RBA RBA Cash Rate Pricing & Blackboard TD Rates 3

4 Funding Sources (Available Stable Funding) Liquid Cover Required (30 days) Stable Funding Value (1 year) All Funding Sources Beyond Tenor Thresholds 0%100% Retail & SME (includes Self-Managed Super Funds) Deposits 5% 90% 10% 80% 25% Corporate and Public Sector Deposits40%50% Other – eg. Financial Institution (including superannuation funds) Deposits; Wholesale Funding (eg. Bank Bills) 100%0% Funding Value: Cash & Bank Paper Source: Basel Committee on Banking Supervision; APRA 4

NAB Deposit Yields 5 Note: Indicative as at 26 June * Indicates Product pays Interest annually but can be modified to pay quarterly or semi annually. 5

Australian Corporates & the Bond Market Source: ABS 6 Outstanding Bonds Issued by Australian Corporates

Considerations for Superannuation Funds Cash  Liquidity Management  Extending deposit tenors  Retail ‘look-through’ deposits Fixed Income  Scarcity of particular liquid assets; consider policy re other liquid assets  Opportunities in Australian fixed interest – corporate debt, ‘credit investing’, infrastructure  Bank securities (repo-eligible and other)  Cross-border impacts given swap costs  Member Engagement  Deposit differentiation  SMSF Threat 7 7