This report, Commissioned by ANZ, examines how various aspects of regulatory policy affect the potential returns on bank deposits for superannuation fund members, implications for retirement income balances, and effects upon the structure of the financial system and financial product design. The key policy issues considered are: the Liquidity Coverage Ratio requirement; the Net Stable Funding ratio requirement; the Financial Claims Scheme; and the levy on non-insured liabilities of large banks announced in the 2017 Federal Budget. The effects arise primarily through liquidity regulation attributing less stability to institutional superannuation fund deposits than to retail deposits.
This is an important distortion in the Australian savings system. The same sorts of deposits made by the same sorts of investors are paid very different prices as a consequence of regulation. The distortion could have major consequences in the advent of a bank failure. Under the current rules, people with deposits made through superannuation funds would lose their money, while other depositors would be protected.
There is a strong case for applying the FCS on a ‘look-through’ basis to institutional superannuation fund bank deposits.