The Australian Prudential Regulation Authority (APRA) has provided an update on its consultation to modernise the prudential framework on governance for banks, insurers and superannuation trustees.
In March, APRA proposed eight measures to update its cross-industry prudential standards and guidance on governance for the first time in more than a decade.
During the three-month consultation period, APRA held 57 meetings and roundtables involving over 150 stakeholder organisations and received almost 80 written submissions. Through these engagements, APRA received broad support for the package overall, especially for initiatives that can reduce burden and address regulatory overlap. But APRA also heard caution around the potential impact of some proposals.
Having carefully considered this feedback, APRA has today written to industry advising it will modify three of its original proposals to ensure they don't impose undue regulatory constraint on boards:
- Instead of a tenure limit for non-executive directors of 10 years with the possibility of a two-year extension, APRA now proposes a hard tenure limit of 12 years with short extensions in limited circumstances.
- A proposal for banks and insurers to have at least two independent directors (including the chair) not on other group boards will not proceed as originally proposed.
- A proposal to require significant financial institutions to engage early with APRA on responsible person appointments and succession planning will also not proceed.
APRA will also clarify or adjust proposals relating to individual director skills, perceived conflicts of interest, and publication of registers of relevant interests and duties.
Chair John Lonsdale said APRA remains committed to uplifting standards of governance in banking, insurance and superannuation.
"Effective governance is fundamental to financial stability and sound risk management. Across our regulated industries, APRA continues to see cases where deficient governance leads to poor prudential outcomes.
"However, in strengthening standards of governance, we want to strike a balance between increased prescription in some areas and making sure we retain sufficient flexibility for different business models.
"We have benefited from the range of feedback from consultation, and today's update demonstrates that we have listened carefully to the views of stakeholders. These changes will still deliver the uplift in governance standards APRA is seeking but we have found an outcome that works better for all parties.
