The Australian Prudential Regulation Association deputy chairman Helen Rowell says it will force the boards of the nation's worst superannuation funds out of the industry unless they improve their performance.
Ms Rowell said the regulator was "turning up the heat" on serial underperformers based on criteria ranging from costs and expenses, asset allocation, performance, finding competitive insurance cover for members and net cash flows.
"We are honing in," she said about the worst 25 of the nation's 250 largest managed superannuation funds.
"Funds have had enough time to bed down administrative and regulatory changes. The next step is for (underperforming) funds to improve performance or exit the industry."
Ms Rowell, who has previously criticised some super funds' "self interested" boards, said it has remedial powers over management and boards that consistently fail their members.
She said APRA's fund supervisory team was intensifying reviews of funds on a range of performance and cost criteria.
It includes quality of governance, asset allocation, costs and expenses, net cash flows and risk levels.
Underperforming executives and boards will be invited by APRA to discuss their strategy for boosting returns, improving services and lowering costs for members.
Ms Rowell said it would "put more pressure (on executives and boards) to make hard decisions".
"If we have to, we will. We can push them to make those decisions."
The nation's top 10 super funds account for about 80 per cent of total industry-wide cash flows. Some smaller funds have been criticised for having large boards that pay trustees between $70,000 and $100,000 a year.
Earlier, Ms Rowell, who was a panel member at the Self Managed Super Fund Association annual conference in Melbourne, said she "sees a lot of self-interest and conflicts of interest" and urged funds to "focus on members' best interests, rather than an institutions".
"One of the industry's biggest challenges will be adjusting to change while maintaining trust," she said.
She claimed constant bickering between private sector and industry funds about regulatory changes, performance, costs and advice continued to weaken public trust.
"The industry is its own worst enemy," she said.
"It sends a lot of messages in a negative way that causes distress and undermines trust. The industry needs to be more positive about what it does rather than constantly throwing rocks at each other."
The Australian Prudential Regulation Authority is a key regulator for the nation's $2.3 trillion superannuation industry.
A recent report revealed that about 45 per cent of the largest superannuation funds in Australia had negative member cash flows in 2016.
Outflows are a combination of lump sum benefits paid, pension benefits paid and outward rollovers,
Inflows are a combination of inward rollovers, employer contributions and member contributions less contribution taxes and government surcharge.
In the 12 months to June 2016, 77 super funds out of the 175 funds that disclose information on cash flows had a net outflow ratio in excess of 100 per cent.
Funds that are shrinking or needing to use capital to pay pension and lump sum obligations to members must adopt conservative investment strategies with high levels of liquidity.
It is also likely management and administrative costs will rise as a fund gets smaller.
SMSFs have grown from a financial services backwater into a powerhouse with more than $650 billion in assets under management.
The super industry remains in a constant state of change and review from regulators, the Productivity Commission, new technological developments, such as robo-advice and evolving standards for financial advice.
Recent surveys said it causes uncertainty and undermines public confidence.
