The implications of complexity for systemic risk in the superannuation system

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The funds, entities and regulators involved in the Australian superannuation industry together comprise a system that is complex and dynamic. The differentiation between roles and the distribution of responsibility offers the system as a whole resilience against local failure. However the interconnections that bind and constitute the system have the potential to create and transmit risks within the system. This undermines the system’s resilience to exogenous shocks. This paper uses a new data set on 200 Australian superannuation funds to map and analyse those links as a first step towards assessing the nature and severity of the threat that the links pose to systemic resilience. It concludes by outlining some of the regulatory issues that arise.

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This paper was presented in July 2014 at the 19th Melbourne Money and Finance Conference (MMFC), which explored the theme Current Issues in Australian Financial Markets.

For more papers presented in the conference, please click here