18 th Melbourne Money & Finance Conference 1 & 2 July 2013

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

2. Basel 3 and Australian Superannuation Funds • 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

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

4. Funding Value: Cash & Bank Paper Source: Basel Committee on Banking Supervision; APRA 4

5. 5 NAB Deposit Yields Note: Indicative as at 26 June 2013. * Indicates Product pays Interest annually but can be modified to pay quarterly or semi annually. 5

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

7. 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