The SMSF Professionals Association of Australia has developed a set of best practice guidelines for lending to self-managed superannuation funds. Yesterday SPAA issued separate guidelines for lenders and advisers.SPAA also announced that National Australia Bank was the first financial institution to adopt the guidelines.SPAA chief executive Andrea Slattery said in a statement that the association was conscious of concerns about limited recourse borrowing arrangements for SMSFs in the interim Financial System inquiry report.The report said: "Direct leverage in superannuation funds is embryonic but growing. The number of SMSFs using gearing products grew by more than 11 per cent to 38,000 over the year to April 2014."A number of submissions point to the stabilising influence of the superannuation sector during the GFC. The current ability of funds to borrow directly may, over time, erode the superannuation system's ability to act as a stabilising influence on the financial system during times of stress."Slattery said there was urgent need to establish a set of guidelines that would ensure a responsible approach to borrowing arrangements.Under the lenders' guidelines, the lender must recommend that the SMSF trustee consult a specialist adviser before borrowing. Lenders must provide trustees with information about the nature of limited recourse borrowing arrangements, their risks, the process of setting up and maintaining a loan, and what happens in the case of a default.The lender must also obtain certification from the trustee that the fund is compliant with its legal and regulator obligations.Advisers must ensure that gearing is an appropriate strategy for the fund, and must explain permitted uses of the loan, costs, tax implications and the technical requirements for SMSF borrowing, such as the rule that the loan can only be used to buy a "single acquirable asset".Slattery said other lenders were "in the pipeline"."We believe that by publishing these guidelines, and with NAB signing on, the Government and regulators can have a high degree of confidence that limited recourse borrowing arrangements are being used appropriately," she said.