APRA probes spending at Cbus as it gains undertaking to fix risk failings at $100b industry fund

The prudential watchdog has widened its probe of Cbus after unveiling its latest attempts to address chronic risk management failings at the $100 billion industry super fund.

The Australian Prudential Regulation Authority revealed it was also investigating expenditure management practices at the building industry fund for possible breaches of laws governing the $4 trillion superannuation industry.

APRA revealed on Tuesday it had gained a court enforceable undertaking from Cbus management company United Super to address risk management failings identified as far back as 2019.

And the watchdog said it lodged a breach report with the Australian Securities and Investments Commission on Christmas Eve after Cbus identified an insurance administration error by its third-party provider.

These alleged insurance breaches come on top of the Federal Court action launched by ASIC in November against United Super and insurance services administrator Australian Administration Services.

Cbus has been chaired by former Federal treasurer Wayne Swan since January 2022, when he took over from former Victorian premier Steve Bracks.

In the twin peaks model of regulating super in Australia, ASIC oversees the finance services end of the industry and APRA scrutinises the risk management practices of the giant funds.

Unveiling the corporate undertaking and its widened Cbus probe on Tuesday, APRA deputy chair Margaret Cole said it expected fund trustees to have robust governance, compliance and risk management frameworks in place

“Where an entity’s practices are found wanting, APRA will not hesitate to take action to protect members’ interests,” Ms Cole said.

The enforceable undertaking points to findings from an APRA prudential review in December that accused United Super of “incomplete risk profiling and over-reliance on informal methods of risk management and third-party risk management deficiencies”.

While not identifying the external providers, APRA said they “gave incomplete and inconsistent information” about risk, controls and compliance”.

And the United Super board “demonstrated insufficient oversight and challenge of operational risk, including follow through to ensure that previously identified weaknesses had been appropriately rectified”.

“Many of the issues identified by the 2024 prudential review were similar to those issues identified three years earlier as part of the 2021 prudential review,” the undertaking said.

With the help of experts approved by APRA, United Super has agreed to prepare an integrated plan to fix its problems based on the various APRA reviews and an analysis designed to find the root cause of the problems.