In a statement on Thursday, the prudential regulator confirmed a new set of proposals aimed at uplifting governance standards among super funds, banks, and insurers – a move it described as “the first significant update to its governance standards for more than a decade”.
The proposals address current areas of poor practice such as skills and capabilities, fitness and propriety, conflicts management, and director tenure and renewal.
The goal is to raise governance standards by ensuring responsible persons meet higher fitness and propriety requirements, fostering diverse and skilled boards, strengthening board independence, and capping non-executive director tenure at 10 years.
“The boards of Australia’s banks, insurers and superannuation trustees have enormous responsibilities when it comes to protecting the financial interests of households and businesses,” APRA chair John Lonsdale said.
“Well-governed institutions are likely to be more resilient in times of stress, while poor governance can create weakness that leads to misconduct, losses and failures. It is no coincidence that almost 80 per cent of entities subject to heightened risk-based APRA supervision have underlying governance problems.”
Lonsdale said that while overall standards of governance have improved over recent years, APRA still sees areas of weakness, including entities treating compliance with some requirements as a box-ticking exercise.
“By articulating our expectations more clearly and strengthening our capacity to ensure compliance with them, we aim to lift governance standards among entities that are lagging best practices and bring them into line with contemporary expectations,” he said.
APRA said the changes would be applied proportionately with reduced expectations in some areas for smaller and less complex financial institutions.
“In developing these proposals, we aim to lift higher standards without adding undue cost burden. Most proposals will involve little change for entities with mature governance practices. Clarifying the role of the board should help to ease the workload for directors and enable them to focus on the most important strategic issues,” Lonsdale said.
APRA intends to spend three months consulting on the matter with stakeholders from banks, insurers and superannuation trustees before a formal round of consultations in 2026. The eventual publish date for the updated framework is the beginning of 2027, with a kick-off date in 2028.
Responding to APRA in a statement on Thursday afternoon, the Association of Superannuation Funds of Australia (ASFA) said the superannuation sector welcomes the proposals and looks forward to engaging with the regulator to ensure the sector continues to align with industry best practice.
“Australia’s superannuation sector manages close to $4.2 trillion of super contributions to help members achieve a dignified and enjoyable retirement. That’s a huge responsibility and one trustees take very seriously, so we have always been keenly focused on ensuring funds are well governed and best prepared to navigate uncertain times, to deliver the best returns for members,” ASFA CEO Mary Delahunty said.
“ASFA has a strong track record of advocating high governance standards, and we look forward to working with APRA in this important endeavour.”
